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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 $532,500 plus $532,500 in cash. Simone's tax basis in the Purple stock was $287,000. What amount of gain does Simone recognize in the exchange and what is her basis in the Plum stock she receives?


A) $778,000 gain recognized and a basis in Plum stock of $1,065,000
B) $778,000 gain recognized and a basis in Plum stock of $532,500
C) $532,500 gain recognized and a basis in Plum stock of $532,500
D) $532,500 gain recognized and a basis in Plum stock of $287,000

E) C) and D)
F) A) and D)

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Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 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 the corporation's tax basis in the property received in the exchange?


A) $800
B) $600
C) $550
D) $450

E) A) and D)
F) None of the above

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Oriole,Incorporated decided to liquidate its wholly owned subsidiary, Tiger Corporation. Tiger had the following tax accounting balance sheet. Oriole,Incorporated 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? 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?

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

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


A) Voting common stock
B) Voting preferred stock
C) Nonvoting preferred stock
D) All of these classes of stock can be used in a §351 transaction.

E) B) and D)
F) A) and D)

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


A) A transferor of property must receive stock equal to at least 80 percent of the fair value of the property transferred.
B) In the aggregate, the transferors of property to the corporation must collectively own 80 percent of the voting stock of 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) All of the above
F) B) and C)

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


A) Control is defined as the ownership of 80 percent or more of a corporation's voting stock.
B) Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock.
C) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock.
D) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock.

E) None of the above
F) B) and D)

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Mandel transferred property to his new corporation in a §351 transaction. Among the several properties transferred by Mandel was land with a fair market value of $200,000 and a tax basis of $250,000. In all cases, the corporation will always take a tax basis in the land of $200,000 to prevent the "built-in loss" from being transferred from Mandel to the corporation.

A) True
B) False

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

A) True
B) False

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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 $427,500. Packard's basis in the State stock was $625,000. The land had a basis to State Company of $535,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?


A) $107,500 loss recognized by State and a basis in the land of $427,500 to Packard.
B) $107,500 loss recognized by State and a basis in the land of $535,000 to Packard.
C) No loss recognized by State and a basis in the land of $427,500 to Packard.
D) No loss recognized by State and a basis in the land of $535,000 to Packard.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
91) Keegan 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.
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 $427,500. Packard's basis in the State stock was $625,000. The land had a basis to State Company of $535,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives? A) $107,500 loss recognized by State and a basis in the land of $427,500 to Packard. B) $107,500 loss recognized by State and a basis in the land of $535,000 to Packard. C) No loss recognized by State and a basis in the land of $427,500 to Packard. D) No loss recognized by State and a basis in the land of $535,000 to Packard. ESSAY. Write your answer in the space provided or on a separate sheet of paper. 91) Keegan 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 equaled the fair market value of the assets transferred to the corporation by Keegan. What amount of gain or loss does Keegan realize on the transfer of the property to his corporation? The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan.
What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

E) All of the above
F) None of the above

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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?


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 $600,000

E) C) and D)
F) B) and D)

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Paladin Corporation transferred its 90 percent interest to Furman Company as part of a complete liquidation of the company. In the exchange, Paladin received land with a fair market value of $1,000,000. The corporation's basis in the Furman Company stock was $400,000. The land had a basis to Furman Company of $200,000. What amount of gain does Paladin recognize in the exchange and what is its basis in the land it receives?


A) $600,000 gain recognized and a basis in the land of $1,000,000
B) $600,000 gain recognized and a basis in the land of $400,000
C) No gain recognized and a basis in the land of $400,000
D) No gain recognized and a basis in the land of $200,000

E) A) and B)
F) None of the above

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Casey transfers property with a tax basis of $2,000 and a fair market value of $5,000 to a corporation in exchange for stock with a fair market value of $4,000 and $400 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $600 on the property transferred. Casey also incurred selling expenses of $300. What is the amount realized by Casey in the exchange?


A) $5,000
B) $4,700
C) $4,600
D) $4,200

E) C) and D)
F) B) and D)

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Roberta transfers property with a tax basis of $435 and a fair market value of $559 to a corporation in exchange for stock with a fair market value of $372 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $187 on the property transferred. What is the amount realized by Roberta in the exchange?


A) $559
B) $435
C) $372
D) $280

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

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


A) The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders.
B) The target must hold substantially all of the target corporation's properties and the properties of the acquisition subsidiary after the merger.
C) The continuity of business enterprise test must be met with respect to the target corporation.
D) The target corporation shareholders must receive voting stock in the acquiring corporation.

E) B) and D)
F) None of the above

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


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 buyer

E) None of the above
F) A) and B)

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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?


A) $600,000 gain recognized and a basis in Azul stock of $400,000
B) No gain recognized and a basis in Azul stock of $400,000
C) $600,000 gain recognized and a basis in Azul stock of $1,000,000
D) No gain recognized and a basis in Azul stock of $1,000,000

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

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Boston, Incorporated 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, Incorporated 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?

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No gain is recognized by Boston, Incorpo...

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Which of the following statements best describes the application of the continuity of enterprise principle to a Type A tax-deferred reorganization?


A) The continuity of business enterprise principle must be satisfied for both the acquirer and the target corporation.
B) The continuity of business enterprise principle must be satisfied for only the target corporation.
C) The continuity of business enterprise principle must be satisfied for only the acquirer.
D) The continuity of business enterprise principle does not have to be satisfied as long as the business purpose principle is satisfied.

E) A) and D)
F) A) and C)

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


A) The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders.
B) The acquirer must hold substantially all of the target corporation's properties after the merger.
C) The continuity of business enterprise test must be met with respect to the target corporation.
D) The target corporation shareholders must receive voting stock in the acquiring corporation.

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

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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) True
B) False

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