Question 1

The so-called "anti-stuffing" rules are designed to thwart shareholders from contributing assets to a loss corporation,chiefly to increase its value for the computation of the § 382 limitation.

Accepted Answer

A) True 
 B)False

Question 2

Rosa Corporation transfers $1 million of its voting stock and $200,000 cash to Clara Corporation in exchange for 90% of its assets.Clara uses all of its remaining assets and the cash received from Rosa to pay its liabilities.Clara then distributes the Rosa stock to its shareholders in exchange for all of their shares of Clara.Lastly,Clara terminates.This restructuring qualifies as a:

Accepted Answer

A) "Type A" reorganization. 
B) "Type B" reorganization. 
C) "Type C" reorganization. 
D) "Type D" reorganization. 
E) Taxable exchange.

Question 3

Match the following items with the statements below. Terms may be used more than once.
a.Capital gain
b.Continuity of business enterprise
c.Continuity of interest
d.Dividend
e.Equity change
f.Liability assumption
g.Ordinary gain
h.Ownership change
i.Not recognized
j.Sound business purpose
k.Step transaction
-Prevents transactions that appear to be a sale from qualifying as nontaxable reorganizations.

Accepted Answer

The answer of Match the following items with the statements...

Question 4

Target Corporation is merging into Acquiring Corporation under state law requirements.Target has 3,000 shares outstanding,with a value of $100 per share.Joey,one of Target's shareholders,exchanges his 500 Target shares,for which he paid $80 per share,for 1,000 shares of Crow stock,valued at $30 per share,and $5,000 cash.Acquiring owns 40% of Crow stock.How does Joey treat this transaction for tax purposes?

Accepted Answer

A) Joey recognizes a $5,000 gain. 
B) Joey has a recognized $60,000 gain. 
C) Joey recognizes no gain or loss. 
D) Joey has a recognized loss of $5,000. 
E) None of the above.

Question 5

What type of reorganization is affected in each of the following independent transactions?
a. "A" reorganization, merger
b. "A" reorganization, consolidation
c. "B" reorganization
d. "C" reorganization
e. Acquisitive "D" reorganization
f. "D" reorganization, spin-off
g. "D" reorganization, split-off
h. "D" reorganization, split-up
i. "E" reorganization
j. "F" reorganization
k. "G" reorganization
l. Taxable transaction
-Snow Corporation desires to change to an S Corporation.On March 1 of the current year,it files all necessary forms with the IRS.The change becomes retroactive to January 1 of the current year.

Accepted Answer

The answer of What type of reorganization is affected in...

Question 6

Brighton Corporation requires all of its shareholders to relinquish a proportionate number of their common shares,and in return they receive preferred stock.For each 10 shares of common stock,the shareholders receive 1 share of preferred.After the transaction is complete,60% of the shareholders sell their preferred stock to the remaining 40% preferred owners.Which of the following statements is correct?

Accepted Answer

A) The exchange of common for preferred is not be taxable. 
B) The shareholders will recognize gain or loss when they sell their preferred stock to the other shareholders. 
C) This qualifies as a "Type E" reorganization. 
D) All of the above are correct. 
E) None of the above is correct.

Question 7

A 50 percentage point ownership shift evoking the § 382 limitations can occur with a "Type E" reorganization when the shareholders exchange their shares for bonds.

Accepted Answer

A) True 
 B)False

Question 8

Present Value Tables needed for this question.Coffee Corporation would like to acquire Cream Corporation on January 3rd of the current year in a tax-free reorganization.Cream is particularly appealing to Coffee because Cream has a $900,000 NOL.Coffee is a very profitable corporation and would be able to use this NOL.At the time of the restructuring,Cream has assets valued at $3 million (basis of $2.8 million).Coffee is proposing exchanging 25% of its stock for all of Cream's assets.The long-term tax-exempt rate and Coffee's discount rate for investment decisions both currently are 6%.What is the maximum present value of the NOL to Coffee?

Accepted Answer

The answer of Present Value Tables needed for this question.Coffee...

Question 9

The objective of the § 382 limitation is to restrict the use of tax carryover benefits to a hypothetical future income stream from the former loss corporation's assets,based on its stock value at the time of the reorganization.

Accepted Answer

A) True 
 B)False

Question 10

Mortisha exchanges her $300,000 in preferred stock and a $100,000 bond for 40% of the common stock (worth $400,000)in Adams Corporation.The bond paid 6% annual interest and the preferred stock had been paying a 5% dividend which was cumulative.The common stock is not likely to pay dividends in the next three years because Adams is having some financial difficulties.

Accepted Answer

A) This transaction qualifies as a "Type B" reorganization. 
B) This transaction qualifies as a "Type E" reorganization. 
C) This transaction qualifies as a "Type F" reorganization. 
D) This transaction qualifies as a "Type G" reorganization. 
E) None of the above.

Question 11

Match the following items with the statements below. Terms may be used more than once.
a.Capital gain
b.Continuity of business enterprise
c.Continuity of interest
d.Dividend
e.Equity change
f.Liability assumption
g.Ordinary gain
h.Ownership change
i.Not recognized
j.Sound business purpose
k.Step transaction
-Shareholder's recognized gain to the extent of proportionate share of corporate earnings and profits in a qualified reorganization.

Accepted Answer

The answer of Match the following items with the statements...

Question 12

Explain when the IRS would use § 269 to disallow the carryover of tax benefits from a target to an acquiring corporation.

Accepted Answer

The answer of Explain when the IRS would use §...

Question 13

Shareholders recognize gains and losses if they receive assets other than stock (boot).

Accepted Answer

A) True 
 B)False

Question 14

North Corporation acquires 90% of South's assets by exchanging $600,000 of its voting stock and assuming $300,000 of South's liabilities.South uses part of its remaining $100,000 in cash to satisfy its $40,000 in liabilities not assumed by North.South then liquidates by transferring the North stock and the $60,000 cash to its shareholders in exchange for their South stock.

Accepted Answer

A) This qualifies as a "Type A" reorganization. 
B) This qualifies as a "Type B" reorganization. 
C) This qualifies as a "Type C" reorganization. 
D) This is a taxable transaction. 
E) None of the above is correct.

Question 15

Deer Corporation was acquired last year by Lobo Corporation in a transaction causing an ownership change.At the time of the acquisition,the fair market value of Deer was $1.5 million and the Federal long-term tax-exempt rate was 5%.In the current year,Lobo has $600,000 of taxable income and excess credits carryovers from Deer amounting to $40,000.What is Lobo's Federal income tax for the year if Lobo is in the 34% tax bracket?

Accepted Answer

A) $178,500. 
B) $96,000. 
C) $55,000. 
D) $27,540. 
E) None of the above.

Question 16

Since the § 382 limitation purpose is to limit losses available to a corporation acquiring a loss corporation,the limitation applies only to NOLs,built-in losses on transferred assets,and capital losses.

Accepted Answer

A) True 
 B)False

Question 17

What type of reorganization is affected in each of the following independent transactions?
a. "A" reorganization, merger
b. "A" reorganization, consolidation
c. "B" reorganization
d. "C" reorganization
e. Acquisitive "D" reorganization
f. "D" reorganization, spin-off
g. "D" reorganization, split-off
h. "D" reorganization, split-up
i. "E" reorganization
j. "F" reorganization
k. "G" reorganization
l. Taxable transaction
-Purple Corporation wants to combine with Pink Corporation.Purple transfers substantially all of its assets to Pink for 82% of Pink's voting shares.Purple distributes the Pink stock and its remaining assets to its shareholders in exchange for their Purple stock.Purple then liquidates.Purple's shareholders are in control of Pink Corporation.

Accepted Answer

The answer of What type of reorganization is affected in...

Question 18

Section 368(a)(1)allows for seven types of reorganizations,each designated by a letter.A "Type A" is a ____________________ or ____________________.A "Type B" is a ____________________ stock for ____________________ exchange.A "Type C" is a stock for ____________________ exchange.A "Type D" can be either ____________________ or ____________________.A "Type E" is a ____________________.A "Type F" is a mere change in the ____________________,_____________________,or ____________________ of organization.Lastly,a "Type G" is a _____________________.

Accepted Answer

The answer of Section 368(a)(1)allows for seven types of reorganizations,each...

Exam 7: Corporations: Reorganizations

The so-called "anti-stuffing" rules are designed to thwart shareholders from contributing assets to a loss corporation,chiefly to increase its value for the computation of the § 382 limitation.

A 50 percentage point ownership shift evoking the § 382 limitations can occur with a "Type E" reorganization when the shareholders exchange their shares for bonds.

The objective of the § 382 limitation is to restrict the use of tax carryover benefits to a hypothetical future income stream from the former loss corporation's assets,based on its stock value at the time of the reorganization.

Explain when the IRS would use § 269 to disallow the carryover of tax benefits from a target to an acquiring corporation.

Shareholders recognize gains and losses if they receive assets other than stock (boot).

Since the § 382 limitation purpose is to limit losses available to a corporation acquiring a loss corporation,the limitation applies only to NOLs,built-in losses on transferred assets,and capital losses.