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In a Type B reorganization,the 1.stock of the target corporation is acquired solely for the voting stock of either the acquiring corporation or its parent. 2) acquiring corporation must have control of the target corporation immediately after the acquisition.


A) Only statement 1 is correct.
B) Only statement 2 is correct.
C) Both statements are correct.
D) Neither statement is correct.

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

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Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

A) True
B) False

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Identify which of the following statements is false.


A) A taxable acquisition of the assets of a target corporation that is subsequently liquidated,results in a loss of the target corporation's tax attributes.
B) A taxable acquisition of the assets of a target corporation,that is subsequently liquidated,results in the target corporation's shareholders recognizing gain or loss on the surrender of their target stock.
C) An acquiring corporation in a tax-free or a taxable acquisition transaction does not recognize gain or loss when its stock is issued in exchange for property.
D) An acquiring corporation in a taxable acquisition transaction must acquire all of the assets and liabilities of the target corporation.

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

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Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation.Immediately after the incorporation,Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock.Motor Corporation is liquidated.Which of the following statements is correct?


A) The asset transfer by Motor Corporation meets the statutory Type C reorganization requirements.
B) The IRS may collapse the two transactions into a single transaction,resulting in denial of tax-free reorganization treatment.
C) The IRS may apply the step transaction doctrine.
D) All of the above statements are correct.

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

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Jersey Corporation purchased 50% of Target Corporation's single class of stock on June 1 of this year.They purchased an additional 40% on November 20 of this year.The Sec.338 election must be made on or before


A) June 30 of this year.
B) November 30 of this year.
C) August 15 of next year.
D) June 30 of next year.

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

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Identify which of the following statements is false.


A) Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.
B) The tax-free reorganization rules are an example of the wherewithal to pay concept.
C) A taxable acquisition of a target corporation's assets results in the nonrecognition of gain or loss on the disposition of each individual asset.
D) Sales of depreciable assets as part of a taxable acquisition result in depreciation recapture.

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

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Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000.The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation.Frank's basis in the Baxter stock he surrenders is $120,000.What is Frank's basis in the Duke stock he receives?

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The correct answer is $120,000...

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On July 1,in connection with a recapitalization of Yorktown Corporation,Robert Moore exchanges 1,000 shares of Yorktown preferred stock,which cost him $95,000,for 1,000 shares of Yorktown common stock worth $108,000 and bonds having a principal amount of $10,000 and an FMV of $10,500.What is the amount of Moore's realized and recognized gain?

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Type A reorganizations include mergers and consolidations.

A) True
B) False

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A stock acquisition that is not treated as a purchase for purposes of meeting the Sec.338 rules is


A) stock whose adjusted basis is determined by its basis in the hands of the person from whom it was acquired.
B) stock acquired from a decedent.
C) stock acquired in a tax-free reorganization.
D) All of the above are correct.

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

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Identify which of the following statements is true.


A) The total basis of the target corporation's assets following a Sec.338 election in general equals the amount paid for the target corporation's stock minus the target corporation's liabilities.
B) The residual method ensures that any premium paid for the target stock is reflected in depreciable assets.
C) The allocation of the total basis of the target corporation's assets to the individual assets following a Sec.338 election occurs under the residual method.
D) All of the above are false.

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

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Acquiring Corporation acquires at the close of business on June 30 (of a nonleap year)all of the stock of Target Corporation as part of a merger transaction.Target Corporation is liquidated into Acquiring Corporation on the same day as part of the merger.Acquiring obtains assets having a $600,000 FMV and a $275,000 adjusted basis,along with a $100,000 net operating loss.Acquiring Corporation reports taxable income of $146,000 for the year.What amount of Target Corporation's NOL can be used to offset Acquiring Corporation's taxable income? (Assume all months have 30 days and ignore the Sec.382 limitation rules. )

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The lesser of Target's NOL carryover ($1...

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Identify which of the following statements is true.


A) A Type B reorganization must be accomplished in one transaction.
B) "Creeping acquisitions" are not allowed in a Type B reorganization.
C) Boxer Corporation acquires 81% of Excel Corporation's stock in a Type B reorganization.When Boxer Corporation acquires an additional 11% of Excel Corporation's stock two years later in exchange for Boxer stock,the second acquisition is also treated as a Type B reorganization.
D) All of the above are false.

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

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Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV) of securities.The assets have an adjusted basis of $600,000 and an FMV of $1,500,000.In addition,Acme Corporation assumes $500,000 of Fisher's liabilities.At the time of the transfer,Acme's E&P is $400,000.Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock.After the reorganization,Barbara owns 25% of Acme's stock.Barbara has an adjusted basis of $400,000 in her Fisher stock.Barbara must recognize a gain of


A) $0.
B) $200,000 dividend income.
C) $200,000 capital gain.
D) $650,000 capital gain.

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

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Broom Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $400,000 to Docker Corporation in exchange for $400,000 of Docker Corporation stock as part of a tax-free reorganization.The Docker stock had been purchased from its shareholders one year earlier for $350,000.How much gain do Broom and Docker Corporations recognize on the asset transfer?


A)  Broom  Docker $0$0\begin{array} { | l | l | } \hline \text { Broom } & \text { Docker } \\\hline \$ 0 & \$ 0 \\\hline\end{array}
B)  Broom  Docker $0$50,000\begin{array} { | l | l | } \hline \text { Broom } & \text { Docker } \\\hline \$ 0 & \$ 50,000 \\\hline\end{array}
C)  Broom  Docker $100,000$0\begin{array} { | l | l | } \hline \text { Broom } & \text { Docker } \\\hline \$ 100,000 & \$ 0 \\\hline\end{array}
D)  Broom  Docker $100,000$50,000\begin{array} { | l | l | } \hline \text { Broom } & \text { Docker } \\\hline \$ 100,000 & \$ 50,000 \\\hline\end{array}

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

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Identify which of the following statements is false.


A) When determining the use of an NOL carryover following a change of ownership,the old loss corporation and the new loss corporation may be the same for Sec.382 purposes.
B) A new loss corporation that does not continue the business enterprise of the old loss corporation during the two-year period beginning on the date of the stock ownership change cannot use the net operating loss carryover.
C) One advantage of a tax-free reorganization is that losses realized as part of a tax-free reorganization are not recognized.
D) For purposes of Sec.382,ownership changes are tested any time a 5% shareholder has a stock transaction affecting his ownership.

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

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Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock) reorganization.Both corporations have always filed separate tax returns.Which one of the following statements regarding the acquisition is correct?


A) Acquiring and Target Corporations can elect to file a consolidated tax return.
B) Acquiring and Target Corporations must file a consolidated tax return.
C) Acquiring Corporation assumes all of the tax attributes of Target Corporation.
D) Acquiring Corporation must step up or step down the basis of the Target Corporation's assets to their FMV on the acquisition date?

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

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Identify which of the following statements is true.


A) Both a Type B reorganization or a reverse triangular merger will not allow the target corporation to remain in existence.
B) Andrews Corporation gives 10% of its stock worth $200,000 and Andrews notes worth $10,000 in exchange for 80% of Baxter Corporation's stock.The exchange qualifies as a Type B reorganization.
C) In a Type B reorganization,with minor exceptions only voting stock can be used by the acquiring corporation to acquire the target corporation's stock.
D) All of the above are false.

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

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Identify which of the following statements is true.


A) Depreciation recapture rules do not override the nonrecognition of gain or loss rules.
B) The acquisition of liabilities by an acquiring corporation will trigger a gain.
C) A target corporation will recognize a gain when it distributes stock to its shareholders.
D) The basis of property acquired in a reorganization is its FMV.

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

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In a nontaxable reorganization,the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

A) True
B) False

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