Question 1

Obtaining a positive letter ruling from the IRS can ensure the desired tax treatment for parties contemplating a corporate reorganization.

Accepted Answer

A) True 
 B)False

Question 2

The stock of Lavender Corporation is held as follows: 80% by Jade Corporation (basis of $400,000) and 20% by Tiffany (basis of $100,000).Lavender Corporation is liquidated in December of the current year,pursuant to a plan adopted earlier in the year.Pursuant to the liquidation,Lavender Corporation distributed Asset A (basis of $600,000,fair market value of $900,000) to Jade,and Asset B (basis of $250,000,fair market value of $225,000) to Tiffany.No election is made under § 338.With respect to the liquidation of Lavender:

Accepted Answer

A) Lavender recognizes a loss of $25,000 on the distribution of Asset B. 
B) Jade has a basis in Asset A of $900,000. 
C) Tiffany has a basis in Asset B of $225,000. 
D) Jade recognizes a gain of $500,000. 
E) Lavender recognizes a gain of $300,000 on the distribution of Asset A.

Question 3

Which of the following statements is true concerning all types of tax-free corporate reorganizations?

Accepted Answer

A) Assets are transferred from one corporation to another. 
B) Stock is exchanged with shareholders. 
C) Liabilities that are assumed when cash is also used as consideration will be treated as boot. 
D) Corporations and shareholders involved in the reorganization will recognize gains but not losses. 
E) None of the above statements is true.

Question 4

The Federal income tax treatment of a corporate restructuring is an extension of allowing entities to form without taxation.

Accepted Answer

A) True 
 B)False

Question 5

Acquiring Corporation transfers $500,000 stock and land with a value of $400,000 (basis of $250,000) to Target for most of its assets.The assets not acquired in the "Type A" reorganization are distributed to Target's shareholder,Tia.They are valued at $100,000 (basis of $120,000).Acquiring stock and the land also are distributed to Tia in exchange for her stock in Target.Tia's basis in her stock is $650,000.What is the gain or loss recognized by Acquiring,Target,and Tia on this restructuring? What is Tia's basis in the Acquiring stock?

Accepted Answer

The answer of Acquiring Corporation transfers $500,000 stock and land...

Question 6

For a corporate restructuring to qualify as a tax-free reorganization,the step transaction doctrine must apply.

Accepted Answer

A) True 
 B)False

Question 7

Liquidation expenses incurred by a corporation are generally deductible as § 162 trade or business expenses.

Accepted Answer

A) True 
 B)False

Question 8

Target shareholders recognize gain or loss when they receive assets (boot) as well as stock in the acquiring corporation in a transaction meeting the § 368 requirements.

Accepted Answer

A) True 
 B)False

Question 9

The amount of gain recognized by a shareholder in a corporate reorganization is based on the shareholder's proportionate share of E & P.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is correct with respect to the § 338 election?

Accepted Answer

A) The subsidiary corporation makes the § 338 election. 
B) A qualified stock purchase occurs when a corporation acquires,in a taxable transaction,at least 80% of the stock (voting power and value) of another corporation within an 18-month period. 
C) The parent recognizes no gain (loss) as a result of the election. 
D) Gain,but not loss,is recognized by the subsidiary as a result of a deemed sale of its assets. 
E) None of the above.

Question 11

Brown Corporation purchased 85% of the stock of Green Corporation five years ago for $850,000.In the current year,Brown Corporation liquidates Green Corporation and acquires assets with a basis to Green Corporation of $700,000 (fair market value of $1.1 million).Brown Corporation will have a basis in the assets of $850,000,the same as Brown's basis in its Green stock.

Accepted Answer

A) True 
 B)False

Question 12

The related-party loss limitation in a complete liquidation applies only to distributions of property while the built-in loss limitation can apply to a distribution or sale of property.

Accepted Answer

A) True 
 B)False

Exam 20: Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Obtaining a positive letter ruling from the IRS can ensure the desired tax treatment for parties contemplating a corporate reorganization.

Which of the following statements is true concerning all types of tax-free corporate reorganizations?

The Federal income tax treatment of a corporate restructuring is an extension of allowing entities to form without taxation.

For a corporate restructuring to qualify as a tax-free reorganization,the step transaction doctrine must apply.

Liquidation expenses incurred by a corporation are generally deductible as § 162 trade or business expenses.

Target shareholders recognize gain or loss when they receive assets (boot) as well as stock in the acquiring corporation in a transaction meeting the § 368 requirements.

The amount of gain recognized by a shareholder in a corporate reorganization is based on the shareholder's proportionate share of E & P.

Which of the following statements is correct with respect to the § 338 election?

The related-party loss limitation in a complete liquidation applies only to distributions of property while the built-in loss limitation can apply to a distribution or sale of property.