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Exam 19: Corporate Formation, Reorganization, and Liquidation

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Question 51

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Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

A) $300.
B) $250.
C) $150.
D) $200.

E) B) and C)
F) A) and C)

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Question 52

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A liquidation of a corporation always is a taxable event for the shareholder(s) of the liquidated corporation.

A) True
B) False

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Question 53

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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 herinterest in Amelia. Laura's tax basis in her Amelia stock is $60,000.What amount of gain or loss does Amelia recognize in the complete liquidation?

A stock-for-stock Type B reorganization will be tax-deferred to a target corporationshareholder as long as at least 80 percent of the consideration received is in the form of stock of the acquirer.

Which of the following statements best describes the concept of control as it applies to a section 351 transaction?

Which of the following principles does not need to be satisfied for an acquisition to be a tax-deferred reorganization?

Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is Rachelle's tax basis in the stockreceived in the exchange?

Jasmine transferred 100 percent of her stock in Emerald Company to Jade Corporation in a Type Amerger. In exchange she received stock in Jade with a fair market value of $800,000 plus$1,200,000 in cash. Jasmine's tax basis in the Emerald stock was $900,000. What amount of gain does Jasmine recognize in the exchange and what is her basis in the Jade stock she receives?

Juan transferred 100 percent of his stock in Rosa Company to Azul Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Azul with a fair market value of $1,000,000. Juan's tax basis in the Rosa stock was $400,000. What amount of gain does Juan recognize in the exchange and what is his basis in the Azul stock he receives?

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Which of the following statements best describes the tax consequences that arise from a contribution of capital to a corporation by an existing sole-shareholder?

A shareholder will own the same percentage of stock in the distributing corporation under both a spin-off and a split-off of a subsidiary.

Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600. In addition, Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process. Which of the following statements best describes the tax result to Sami because of the exchanges?

Gain and loss realized in a section 351 transaction will be recognized if the taxpayerreceives boot in the exchange.

Han transferred land to his corporation in a section 351 transaction. Han had held the land for two years prior to the transfer. The corporation will tack Han's holding period for the land.

Which of the following class of stock is not allowed to be used in a section 351 transaction?

Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in theexchange?

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?

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?