Question 1

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

Question 2

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?

Accepted Answer

$400,000 capital loss. Her bas...

Question 3

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

Accepted Answer

A)   The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals its fair market value.
B)   The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred.
C)   The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred.
D)   The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals zero.E) B) and D)
F) None of the above

Question 4

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Accepted Answer

A)   If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's fair market value.
B)   If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder.
C)   If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property.
D)   If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property.E) A) and C)
F) B) and C)

Question 5

What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

Accepted Answer

Gain reali...

Question 6

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 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) All of the above
F) A) and D)

Question 7

What amount of gain or loss does Michelle recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

Accepted Answer

Michelle recognizes gain of $200,000 on ...

Question 8

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

Question 9

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

Accepted Answer

A)   Continuity of interest
B)   Continuity of purpose
C)   Business purpose
D)   Continuity of business enterpriseE) A) and B)
F) None of the above

Question 10

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. $$\begin{array} { l r l r } 
& { \text { FMV } } & & { \text { Adjusted basis } } \
\text { Inventory } & \$ 30,000 & & \$ 10,000 \
\text { Building } & 130,000 & & 80,000 \
\text { Land } & \underline { 50,000 } & & \underline { 100,000 } \
\text { Total } & \$ 210,000 & & \$ \underline { \underline { 190,000 } }
\end{array}$$ The corporation also assumed a mortgage of $60,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $150,000.
What amount of gain or loss does Francine recognize on the transfer of the property to her corporation?

Accepted Answer

Francine does not recognize an...

Question 11

Which of the following amounts is not included in the computation of amount realized in an exchange?

Accepted Answer

A)   Cash received
B)   Fair market value of property received
C)   Selling expenses
D)   Adjusted basis of property transferredE) A) and B)
F) B) and C)

Question 12

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 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?

Accepted Answer

A)   $5,000
B)   $4,700
C)   $4,600
D)   $4,200E) None of the above
F) All of the above

Question 13

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

Question 14

Rich and Rita propose to have their corporation, Big Blue, acquire another corporation, Green Company, in a stock-for-stock Type B acquisition. The sole shareholder of Green, Mark Dee, will receive $500,000 of Big Blue voting stock in the transaction. Mark's tax basis in his Green stock is $100,000. What is Mark's tax basis in the Big Blue stock he receives in the exchange and what is Big Blue's basis in the Green stock it receives in return?

Accepted Answer

Mark's basis in the Big Blue s...

Question 15

Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $500,000. The corporation's basis in the Tea Company stock was $300,000. The land had a basis to Tea Company of $600,000. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives?

Accepted Answer

A)   $200,000 gain recognized and a basis in the land of $600,000
B)   $200,000 gain recognized and a basis in the land of $500,000
C)   No gain recognized and a basis in the land of $600,000
D)   No gain recognized and a basis in the land of $300,000E) A) and D)
F) B) and C)

Question 16

Which of the following statements best describes a section 338 transaction?

Accepted Answer

A)   A section 338 transaction is an election made by the buyer to treat a stock acquisition as an asset acquisition.
B)   A section 338 transaction is an election made by the buyer to treat an asset acquisition as a stock acquisition.
C)   A section 338 transaction is an election made by the seller to treat a stock acquisition as an asset acquisition.
D)   A section 338 transaction is an election made by the seller to treat an asset acquisition as a stock acquisition.E) A) and D)
F) B) and D)

Question 17

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

Accepted Answer

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

Question 18

A Type A reorganization deals with the transfer of assets by the target corporation in a merger.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

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) All of the above
F) B) and C)

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 19: Corporate Formation, Reorganization, and Liquidation

Correct Answer
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Francine does not recognize an...
View Answer

Correct Answer
verified
Mark's basis in the Big Blue s...
View Answer

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.

Correct Answer
verified

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
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Which of the following amounts is not included in the computation of amount realized in an exchange?

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

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

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements best describes a section 338 transaction?

Correct Answer
verified

A Type A reorganization deals with the transfer of assets by the target corporation in a merger.

Correct Answer
verified

Correct Answer
verified
$400,000 capital loss. Her bas...
View Answer

What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

Correct Answer
verified
Gain reali...
View Answer

What amount of gain or loss does Michelle recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

Correct Answer
verified
Michelle recognizes gain of $200,000 on ...
View Answer

Exam 19: Corporate Formation, Reorganization, and Liquidation

Correct AnswerverifiedFrancine does not recognize an...View AnswerShow Answer

Correct AnswerverifiedMark's basis in the Big Blue s...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following amounts is not included in the computation of amount realized in an exchange?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements best describes a section 338 transaction?

Correct AnswerverifiedShow Answer

A Type A reorganization deals with the transfer of assets by the target corporation in a merger.

Correct AnswerverifiedShow Answer

Correct Answerverified$400,000 capital loss. Her bas...View AnswerShow Answer

What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

Correct AnswerverifiedGain reali...View AnswerShow Answer

What amount of gain or loss does Michelle recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

Correct AnswerverifiedMichelle recognizes gain of $200,000 on ...View AnswerShow Answer

Correct Answer
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Francine does not recognize an...
View Answer

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Mark's basis in the Big Blue s...
View Answer

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Correct Answer
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$400,000 capital loss. Her bas...
View Answer

Correct Answer
verified
Gain reali...
View Answer

Correct Answer
verified
Michelle recognizes gain of $200,000 on ...
View Answer