FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 19: Corporate Formation, Reorganization, and Liquidation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

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

A) Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer.
B) Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer.
C) Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer.
D) Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer.

E) A) and B)
F) All of the above

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

Maria defers $100 of gain realized in a §351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

Amy transfers property with a tax basis of $1,455 and a fair market value of $1,095 to a corporation in exchange for stock with a fair market value of $850 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $245 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

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

Mike and Michelle decided to liquidate their jointly owned corporation, Pennsylvania Corporation. After liquidating its remaining inventory and paying off its remaining liabilities, Pennsylvania had the following tax accounting balance sheet. Under the terms of the agreement, Mike will receive the $200,000 cash in exchange for his 40 percent interest in Pennsylvania. Mike's tax basis in his Pennsylvania stock is $50,000. Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania. Her tax basis in the Pennsylvania stock is $100,000. What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

Francine incorporated her 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 corporation also assumed a mortgage of $66,500 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $217,500. a. What amount of gain or loss does Francine realize on the transfer of the property to her corporation? b. What amount of gain or loss does Francine recognize on the transfer of the property to her corporation? c. What is Francine's basis in the stock she receives in her corporation?

Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packard received land with a fair market value of $497,500. Packard's basis in the State stock was $687,500. The land had a basis to State Company of $635,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?

Mike and Michelle decided to liquidate their jointly owned corporation, Pennsylvania Corporation. After liquidating its remaining inventory and paying off its remaining liabilities, Pennsylvania had the following tax accounting balance sheet. Under the terms of the agreement, Mike will receive the $283,000 cash in exchange for his 40 percent interest in Pennsylvania. Mike's tax basis in his Pennsylvania stock is $68,000. Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania. Her tax basis in the Pennsylvania stock is $136,000.What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

April transferred 100 percent of her stock in June Company to March Corporation in a taxable merger. In exchange she received stock in March with a fair market value of $400,000 plus $1,200,000 in cash. April's tax basis in the June stock was $2,000,000. What amount of loss does April recognize in the exchange and what is her basis in the March stock she receives?

Which of the following statements does not describe a requirement that must be met in a tax-deferred reverse triangular merger?

Carlos transfers property with a tax basis of $535 and a fair market value of $1,060 to a corporation in exchange for stock with a fair market value of $785 and $56 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $219 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Which of the following statements about §351 transactions is false?

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?

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?

The shareholders in the target corporation always receive a tax basis in the stock received from the acquirer equal to the stock's fair market value.

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

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

Tristan transfers property with a tax basis of $1,015 and a fair market value of $1,520 to a corporation in exchange for stock with a fair market value of $1,015 and $378 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $127 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives? The distribution was non-pro rata to Robin, a related person.

The City of Boston made a capital contribution of land to Fenway Company as an inducement to the company to build a manufacturing plant in the city. Boston paid $600,000 for the land several years ago and it currently has a fair market value of $1,000,000. What is the tax basis of the land to Fenway Company?