Question 1

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

Accepted Answer

A)   Gain or loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
B)   Gain or 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) B) and D)
F) B) and C)

Question 2

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) A) and B)

Question 3

A §338 transaction is a stock acquisition elected to be treated as an asset acquisition.

Accepted Answer

A) True 
 B)False

Question 4

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 $965,000. Robin's basis in the Cardinal stock was $987,500. The land had a basis to Cardinal Company of $1,245,000. 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)   $280,000 loss recognized by Cardinal and a basis in the land of $1,245,000 to Robin
B)   $280,000 loss recognized by Cardinal and a basis in the land of $965,000 to Robin
C)   No loss recognized by Cardinal and a basis in the land of $1,245,000 to Robin
D)   No loss recognized by Cardinal and a basis in the land of $965,000 to RobinE) None of the above
F) B) and D)

Question 5

Ashley transfers property with a tax basis of $8,240 and a fair market value of $4,840 to a corporation in exchange for stock with a fair market value of $3,400 and $525 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $915 on the property transferred. What is Ashley's tax basis in the stock received in the exchange?

Accepted Answer

A)   $8,240
B)   $6,800
C)   $4,840
D)   $3,400E) B) and D)
F) None of the above

Question 6

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?

Accepted Answer

No loss recognized. Her basis in the App...

Question 7

Phillip 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 was $458,250. The transaction met the requirements to be tax-deferred under §351.
a. What amount of net gain or loss does Phillip realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Phillip recognize on the transfer of the property to his corporation?
c. What is the corporation's adjusted basis in each of the assets received in the exchange?

Accepted Answer

a.
Net ${{[a(10)]:#,###}} loss

b. Phil...

Question 8

Han transferred land to his solely owned corporation in a §351 transaction. Han had held the land for two years prior to the transfer and recognized no gain on the transfer. The corporation will tack Han's holding period for the land.

Accepted Answer

A) True 
 B)False

Question 9

Gary and Laura decided to liquidate their jointly owned corporation, Amelia, Incorporated. After liquidating its remaining inventory and paying off its remaining liabilities, Amelia had the following tax accounting balance sheet.
  Under the terms of the agreement, Gary will receive the $100,000 cash in exchange for his interest in Amelia. Gary's tax basis in his Amelia stock is $30,000. Laura will receive the building and land in exchange for her interest in Amelia. Laura's tax basis in her Amelia stock is $60,000.
What amount of gain or loss does Gary recognize in the complete liquidation?

Accepted Answer

Gary recognizes gain of $70,000 on the t...

Question 10

Amy transfers property with a tax basis of $1,590 and a fair market value of $1,080 to a corporation in exchange for stock with a fair market value of $605 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $475 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Accepted Answer

A)   $1,590
B)   $1,115
C)   $1,015
D)   $605E) B) and C)
F) A) and B)

Question 11

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

Question 12

Which of the following statements best describes the tax results to a shareholder in a §351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

Accepted Answer

A)   Liabilities assumed by a corporation on a §351 transfer are always treated as boot.
B)   Liabilities assumed by a corporation on a §351 transfer are never treated as boot.
C)   Liabilities assumed by a corporation on a §351 transfer are treated as boot if the total liabilities assumed exceed the total basis of the assets transferred.
D)   Liabilities assumed by a corporation on a §351 transfer are treated as boot if there is no business purpose for the assumption of the liabilities by the corporation.E) B) and C)
F) A) and D)

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Casey transfers property with a tax basis of $2,500 and a fair market value of $6,900 to a corporation in exchange for stock with a fair market value of $5,300 and $700 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $900 on the property transferred. Casey also incurred selling expenses of $316. What is the amount realized by Casey in the exchange?

Accepted Answer

A)   $6,900
B)   $6,584
C)   $6,484
D)   $5,784E) A) and C)
F) A) and B)

Question 15

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

Question 16

Zhao 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.
  The corporation also assumed a mortgage of $50,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $330,000. The transaction met the requirements to be tax-deferred under §351.
a. What amount of gain or loss does Zhao realize on the transfer of the property to her corporation?
b. What amount of gain or loss does Zhao recognize on the transfer of the property to her corporation?
c. What is the corporation's adjusted basis in each of the assets received in the exchange?

Accepted Answer

a.$70,000 gain

b. Zhao does not recogn...

Question 17

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 D)
F) None of the above

Question 18

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 $957,500 plus $1,262,500 in cash. Jasmine's tax basis in the Emerald stock was $1,113,500. What amount of gain does Jasmine recognize in the exchange and what is her basis in the Jade stock she receives?

Accepted Answer

${{[a(4)]:#,###}} gain recognized and a ...

Question 19

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

Accepted Answer

A)   If the basis of a property transferred to a corporation under §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 §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 §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 §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) B) and D)
F) B) and C)

Question 20

Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $450 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Accepted Answer

A)   $900
B)   $750
C)   $650
D)   $450E) B) and C)
F) A) and D)

Exam 8: Corporate Formation, Reorganization, and Liquidation

Correct Answer
verified
No loss recognized. Her basis in the App...
View Answer

Correct Answer
verified

A §338 transaction is a stock acquisition elected to be treated as an asset acquisition.

Correct Answer
verified

Han transferred land to his solely owned corporation in a §351 transaction. Han had held the land for two years prior to the transfer and recognized no gain on the transfer. The corporation will tack Han's holding period for the land.

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Gary recognizes gain of $70,000 on the t...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
a.$70,000 gain
b. Zhao does not recogn...
View Answer

Correct Answer
verified
${{[a(4)]:#,###}} gain recognized and a ...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Which of the following statements best describes the tax results to a shareholder in a §351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.
Net ${{[a(10)]:#,###}} loss
b. Phil...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Corporate Formation, Reorganization, and Liquidation

Correct AnswerverifiedNo loss recognized. Her basis in the App...View AnswerShow Answer

Correct AnswerverifiedShow Answer

A §338 transaction is a stock acquisition elected to be treated as an asset acquisition.

Correct AnswerverifiedShow Answer

Han transferred land to his solely owned corporation in a §351 transaction. Han had held the land for two years prior to the transfer and recognized no gain on the transfer. The corporation will tack Han's holding period for the land.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedGary recognizes gain of $70,000 on the t...View AnswerShow Answer

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 Answerverifieda.$70,000 gain b. Zhao does not recogn...View AnswerShow Answer

Correct Answerverified${{[a(4)]:#,###}} gain recognized and a ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements best describes the tax results to a shareholder in a §351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Net ${{[a(10)]:#,###}} loss b. Phil...View AnswerShow 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 law approach to recognizing gain or loss realized in an exchange?

Correct AnswerverifiedShow Answer

Correct Answer
verified
No loss recognized. Her basis in the App...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Gary recognizes gain of $70,000 on the t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.$70,000 gain
b. Zhao does not recogn...
View Answer

Correct Answer
verified
${{[a(4)]:#,###}} gain recognized and a ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.
Net ${{[a(10)]:#,###}} loss
b. Phil...
View Answer

Correct Answer
verified

Correct Answer
verified