Question 1

What amount of gain or loss does Mike recognize in the complete liquidation?

Accepted Answer

Mike recognizes gain of $150,0...

Question 2

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 the exchange?

Accepted Answer

A)   $600
B)   $550
C)   $500
D)   $450E) None of the above
F) C) and D)

Question 3

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

Accepted Answer

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

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

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

Question 6

Gain or loss is always recognized when realized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A)   $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000
B)   $200,000 loss recognized by Cardinal and a basis in the land of $800,000
C)   No loss recognized by Cardinal and a basis in the land of $1,000,000
D)   No loss recognized by Cardinal and a basis in the land of $800,000E) A) and B)
F) A) and C)

Question 8

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

Accepted Answer

A)   Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
B)   Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code.
C)   Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
D)   Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.E) A) and B)
F) None of the above

Question 9

A liquidation of a corporation always is a taxable event to the shareholders of the liquidated corporation.

Accepted Answer

A) True 
 B)False

Question 10

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.

Accepted Answer

A) True 
 B)False

Question 11

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 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?

Accepted Answer

A)   $800
B)   $600
C)   $550
D)   $450E) A) and B)
F) None of the above

Question 12

Jasmine transferred 100 percent of her stock in Emerald Company to Jade Corporation in a Type A merger. 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?

Accepted Answer

$1,100,000 gain reco...

Question 13

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 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 stock received in the exchange?

Accepted Answer

A)   $900
B)   $850
C)   $750
D)   $700E) C) and D)
F) B) and D)

Question 14

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?

Accepted Answer

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 $200,000E) None of the above
F) B) and D)

Question 15

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?

Accepted Answer

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 $1,000,000E) A) and D)
F) All of the above

Question 16

In December 2011, Jill incurred a $50,000 loss on the sale of Crown Corporation stock that she purchased in 2005. The stock satisfied all of the §1244 stock requirements at the time of issue. Jill is married to Jack and together they file a joint tax return. How much of the loss can Jack and Jill deduct in 2011, assuming they do not have capital gains in the current or prior years, and what is the character of the loss?

Accepted Answer

$50,000 or...

Question 17

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

Accepted Answer

A) True 
 B)False

Question 18

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 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?

Accepted Answer

A)   $900
B)   $850
C)   $800
D)   $750E) B) and C)
F) A) and B)

Question 19

Roy transfers property with a tax basis of $800 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $400 and $50 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Roy's tax basis in the stock received in the exchange?

Accepted Answer

A)   $800
B)   $750
C)   $700
D)   $500E) A) and B)
F) A) and C)

Question 20

Celeste transferred 100 percent of her stock in Supply Chain Company to Marketing Corporation in a Type A merger. In exchange, she received stock in Marketing with a fair market value of $500,000 plus $500,000 in cash. Celeste's tax basis in the Supply Chain stock was $1,200,000. What amount of loss does Celeste recognize in the exchange and what is her basis in the Marketing stock she receives?

Accepted Answer

A)   $200,000 loss recognized and a basis in Marketing stock of $1,200,000
B)   No loss recognized and a basis in Marketing stock of $1,200,000
C)   $200,000 loss recognized and a basis in Marketing stock of $700,000
D)   No loss recognized and a basis in Marketing stock of $700,000E) C) and D)
F) B) and D)

Exam 19: Corporate Formation, Reorganization, and Liquidation

Gain or loss is always recognized when realized for tax purposes.

Correct Answer
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The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

Correct Answer
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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?

Correct Answer
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Correct Answer
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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.

Correct Answer
verified

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.

Correct Answer
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Correct Answer
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A liquidation of a corporation always is a taxable event to the shareholders of the liquidated corporation.

Correct Answer
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Correct Answer
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Correct Answer
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$1,100,000 gain reco...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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What amount of gain or loss does Mike recognize in the complete liquidation?

Correct Answer
verified
Mike recognizes gain of $150,0...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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$50,000 or...
View Answer

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

Correct Answer
verified

Correct Answer
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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?

Correct Answer
verified

Exam 19: Corporate Formation, Reorganization, and Liquidation

Gain or loss is always recognized when realized for tax purposes.

Correct AnswerverifiedShow Answer

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A liquidation of a corporation always is a taxable event to the shareholders of the liquidated corporation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified$1,100,000 gain reco...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What amount of gain or loss does Mike recognize in the complete liquidation?

Correct AnswerverifiedMike recognizes gain of $150,0...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified$50,000 or...View AnswerShow Answer

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
$1,100,000 gain reco...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Mike recognizes gain of $150,0...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
$50,000 or...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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