FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Corporate Formation, Reorganization, and Liquidation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

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 cash 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?

A) $1,200
B) $1,100
C) $850
D) $750

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

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

Katarina transferred her 10 percent interest to Spartan Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Katarina's basis in the Spartan stock was $100,000. The land had a basis to Spartan Company of $50,000. What amount of gain does Spartan recognize in the exchange and what is Katarina's basis in the land she receives?

A) $100,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina
B) $150,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina
C) No gain recognized by Spartan and a basis in the land of $100,000 to Katarina
D) No gain recognized by Spartan and a basis in the land of $50,000 to Katarina

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

Correct Answer

verified

Show Answer

Question 3

True/False

Review LaterAdd Note

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

Maria defers $100 of gain realized in a section 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.

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?

Sue transferred 100 percent of her stock in Oakland Company to Applegate Corporation in a Type A merger. In exchange she received stock in Applegate with a fair market value of $800,000 plus $400,000 in cash. Sue's tax basis in the Oakland stock was $1,500,000. What amount of gain or loss does Sue recognize in the exchange and what is her basis in the Applegate stock she receives?

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in a transaction.

Which of the following requirements do not have to be met in a section 351 transaction?

The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value. Because the transaction is taxable to noncorporate shareholders, the basis of property received equals its fair market value.

Oriole, Inc. 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?

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?

Which of the following statements does not describe a motivation by the buyer or seller in the acquisition or sale of a company?

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?

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 stock received in the exchange?

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?

Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Apricot with a fair market value of $200,000. Julian's tax basis in the Lemon stock was $400,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

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

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. A split-off is non-pro rata and usually results in shareholders changing their relative ownership percentages in the distributing corporation.

A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchange. The stock can be voting or nonvoting, common or preferred.

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?