Question 1

Type A reorganizations involve the transfer of assets of targets corporation via a merger or consolidation.

Accepted Answer

A) True 
 B)False

Question 2

Gary and Laura decided to liquidate their jointly owned corporation, Amelia, Inc. After liquidating its remaining inventory and paying off its remaining liabilities, Amelia had the following tax accounting balance sheet.  
Under the terms of the agreement, Gary will receive the $100,000 cash in exchange for his interest in Amelia. Gary's tax basis in his Amelia stock is $30,000. Laura will receive the building and land in exchange for her interest in Amelia. Laura's tax basis in her Amelia stock is $60,000.
What amount of gain or loss does Gary recognize in the complete liquidation?

Accepted Answer

Gary recognizes gain of $70,000 on the t...

Question 3

Jamie transferred 100 percent of her stock in Fox Company to Otter Corporation in a Type A merger. In exchange, she received stock in Otter with a fair market value of $400,000 plus $600,000 in cash. Jamie's tax basis in the Fox stock was $600,000. What amount of gain does Jamie recognize in the exchange and what is her basis in the Otter stock she receives?

Accepted Answer

A)  $400,000 gain recognized and a basis in Otter stock of $400,000
B)  $600,000 gain recognized and a basis in Otter stock of $400,000
C)  $400,000 gain recognized and a basis in Otter stock of $600,000
D)  $600,000 gain recognized and a basis in Otter stock of $600,000E) All of the above
F) C) and D)

Question 4

Oriole, Inc. decided to liquidate its wholly-owned subsidiary, Tiger Corporation. Tiger had the following tax accounting balance sheet.  
a. What amount of gain or loss does Tiger recognize in the complete liquidation?
b. What amount of gain or loss does Oriole recognize in the complete liquidation?
c. What is Oriole's tax basis in the building and land after the complete liquidation?

Accepted Answer

a. No gain or loss is recognized.
b. No ...

Question 5

Jasmine transferred 100 percent of her stock in Woodward Company to Jefferson Corporation in a Type A merger. In exchange, she received stock in Jefferson with a fair market value of $600,000 plus $400,000 in cash. Jasmine's tax basis in the Woodward stock was $1,500,000. What amount of loss does Jasmine recognize in the exchange and what is her basis in the Jefferson stock she receives?

Accepted Answer

A)  $500,000 loss recognized and a basis in Jefferson stock of $600,000
B)  $500,000 loss recognized and a basis in Jefferson stock of $1,100,000
C)  No loss recognized and a basis in Jefferson stock of $1,500,000
D)  No loss recognized and a basis in Jefferson stock of $1,100,000E) A) and B)
F) A) and C)

Question 6

Harry and Sally formed Empire Corporation on January 2. Harry contributed cash of $500,000 in return for 50 percent of the corporation's stock. Sally contributed a building and land with the following fair market values and adjusted basis in return for 50 percent of the corporation's stock.  
To equalize the exchange, Empire Corporation paid Sally $100,000 in addition to her stock.
a. What amount of gain or loss does Sally realize on the formation of the corporation?
b. What amount of gain or loss, if any, does she recognize?
c. What is Sally's tax basis in the stock she receives in return for her contribution of property to the corporation?
d. What adjusted basis does Empire Corporation take in the land and building received from Sally?

Accepted Answer

a. $50,000 loss realized
b. $30,000 gain...

Question 7

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

Accepted Answer

A)  Selling expenses incurred by the buyer
B)  Acquisition cost of the buyer
C)  Capital improvements made to the property by the buyer
D)  Depreciation of the property by the buyerE) B) and C)
F) None of the above

Question 8

Which of the following requirements do not have to be met in a section 351 transaction?

Accepted Answer

A)  Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred.
B)  In the aggregate, the transferors of property to the corporation must collectively control the corporation immediately after the transfers.
C)  Only property transferred to a corporation is eligible for deferral.
D)  All transfers of property to a corporation must be made simultaneously to qualify for deferral.E) A) and B)
F) None of the above

Question 9

Boston, Inc. made a capital contribution of investment property to its 100 percent-owned subsidiary, Hartford Company. The investment property had a fair market value of $1,000,000 and a tax basis to Boston of $250,000. What are the tax consequences to Boston, Inc. on the contribution of the investment property to Hartford Company and what is the tax basis of the investment property to Hartford Company after the contribution to capital?

Accepted Answer

No gain is recognized by Boston, Inc. Th...

Question 10

In December 2016, Zeb incurred a $100,000 loss on the sale of Pike Corporation stock that he purchased in 2010. The stock satisfied all of the §1244 stock requirements at the time of issue. In addition, Zeb reported a long-term capital gain of $40,000 in 2016. Zeb is single. How much of the loss can Zeb deduct in 2016, and what is the character of the loss?

Accepted Answer

$50,000 ordinary loss under §1244, $40,0...

Question 11

The definition of property as it relates to a section 351 transaction includes money.

Accepted Answer

A) True 
 B)False

Question 12

Tax considerations are always the primary reason for structuring an acquisition.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements best describes the tax consequences of a section 338 election?

Accepted Answer

A)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired.
B)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired.
C)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired.
D)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquireD.The tax benefits from a step-up in basis usually is negated by the immediate tax paid on the deemed sale of assets by the acquired corporation.E) B) and D)
F) B) and C)

Question 14

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

Accepted Answer

A)  Section 1244 allows an individual shareholder to exempt gain from sale of the stock from tax.
B)  Section 1244 allows an individual shareholder to deduct all of the loss from sale of the stock as an ordinary loss in the year of the sale.
C)  Section 1244 allows an individual shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the sale.
D)  Section 1244 allows a corporate shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the salE.§1244 applies only to individuals and limits the treatment of loss as ordinary to $50,000 ($100,000 if married filing jointly) .E) None of the above
F) C) and D)

Question 15

To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Accepted Answer

A) True 
 B)False

Question 16

Camille transfers property with a tax basis of $800 and a fair market value of $1,200 to a corporation in exchange for stock with a fair market value of $850 and $350 in cash in a transaction that qualifies for deferral under section 351. Camille also incurred selling expenses of $100. What is the amount realized by Camille in the exchange?

Accepted Answer

A)  $1,200
B)  $1,100
C)  $850
D)  $750E) A) and D)
F) B) and C)

Question 17

Phillip incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.  
The fair market value of the corporation's stock received in the exchange was $400,000. The transaction met the requirements to be tax-deferred under §351.
a. What amount of net gain or loss does Phillip realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Phillip recognize on the transfer of the property to his corporation?
c. What is the corporation's adjusted basis in each of the assets received in the exchange?

Accepted Answer

a. Net $50,000 loss
b. Phillip does not ...

Question 18

Simone transferred 100 percent of her stock in Purple Company to Plum Corporation in a Type A merger. In exchange, she received stock in Plum with a fair market value of $500,000 plus $500,000 in cash. Simone's tax basis in the Purple stock was $200,000. What amount of gain does Simone recognize in the exchange and what is her basis in the Plum stock she receives?

Accepted Answer

A)  $800,000 gain recognized and a basis in Plum stock of $1,000,000
B)  $800,000 gain recognized and a basis in Plum stock of $500,000
C)  $500,000 gain recognized and a basis in Plum stock of $500,000
D)  $500,000 gain recognized and a basis in Plum stock of $200,000E) A) and B)
F) None of the above

Question 19

A liquidated corporation will always recognize gain in a complete liquidation.

Accepted Answer

A) True 
 B)False

Question 20

In a tax-deferred transaction, the calculation of a taxpayer's tax basis in property always begins with its cost to the taxpayer.

Accepted Answer

A) True 
 B)False

Exam 19: Corporate Formation, Reorganization, and Liquidation

Correct Answer
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a. No gain or loss is recognized.
b. No ...
View Answer

Correct Answer
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a. Net $50,000 loss
b. Phillip does not ...
View Answer

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

Correct Answer
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Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

Correct Answer
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Type A reorganizations involve the transfer of assets of targets corporation via a merger or consolidation.

Correct Answer
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Correct Answer
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Which of the following requirements do not have to be met in a section 351 transaction?

Correct Answer
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To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Correct Answer
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Correct Answer
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Correct Answer
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No gain is recognized by Boston, Inc. Th...
View Answer

Correct Answer
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Correct Answer
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$50,000 ordinary loss under §1244, $40,0...
View Answer

Tax considerations are always the primary reason for structuring an acquisition.

Correct Answer
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Correct Answer
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a. $50,000 loss realized
b. $30,000 gain...
View Answer

The definition of property as it relates to a section 351 transaction includes money.

Correct Answer
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Correct Answer
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Gary recognizes gain of $70,000 on the t...
View Answer

In a tax-deferred transaction, the calculation of a taxpayer's tax basis in property always begins with its cost to the taxpayer.

Correct Answer
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Correct Answer
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A liquidated corporation will always recognize gain in a complete liquidation.

Correct Answer
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Which of the following statements best describes the tax consequences of a section 338 election?

Correct Answer
verified

Exam 19: Corporate Formation, Reorganization, and Liquidation

Correct Answerverifieda. No gain or loss is recognized.b. No ...View AnswerShow Answer

Correct Answerverifieda. Net $50,000 lossb. Phillip does not ...View AnswerShow Answer

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

Correct AnswerverifiedShow Answer

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

Correct AnswerverifiedShow Answer

Type A reorganizations involve the transfer of assets of targets corporation via a merger or consolidation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following requirements do not have to be met in a section 351 transaction?

Correct AnswerverifiedShow Answer

To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo gain is recognized by Boston, Inc. Th...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified$50,000 ordinary loss under §1244, $40,0...View AnswerShow Answer

Tax considerations are always the primary reason for structuring an acquisition.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $50,000 loss realizedb. $30,000 gain...View AnswerShow Answer

The definition of property as it relates to a section 351 transaction includes money.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedGary recognizes gain of $70,000 on the t...View AnswerShow Answer

In a tax-deferred transaction, the calculation of a taxpayer's tax basis in property always begins with its cost to the taxpayer.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A liquidated corporation will always recognize gain in a complete liquidation.

Correct AnswerverifiedShow Answer

Which of the following statements best describes the tax consequences of a section 338 election?

Correct AnswerverifiedShow Answer

Correct Answer
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a. No gain or loss is recognized.
b. No ...
View Answer

Correct Answer
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a. Net $50,000 loss
b. Phillip does not ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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No gain is recognized by Boston, Inc. Th...
View Answer

Correct Answer
verified

Correct Answer
verified
$50,000 ordinary loss under §1244, $40,0...
View Answer

Correct Answer
verified

Correct Answer
verified
a. $50,000 loss realized
b. $30,000 gain...
View Answer

Correct Answer
verified

Correct Answer
verified
Gary recognizes gain of $70,000 on the t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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