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Exam 19: Corporate Formation, Reorganization, and Liquidation

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Question 21

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What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

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Question 22

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

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 acquirer must hold substantially all of the target corporation's properties 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) All of the above

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Question 23

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Billie transferred her 20 percent interest to Jean Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Billie's basis in the Jean stock was $100,000. The land had a basis to Jean Company of $400,000. What amount of loss does Jean recognize in the exchange and what is Billie's basis in the land she receives? Billie is not considered a related party to Jean Company.

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

Which statement best describes the concept of realization as it applies to gain or loss?

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?

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

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?

Ashley transfers property with a tax basis of $5,000 and a fair market value of $3,000 to a corporation in exchange for stock with a fair market value of $2,000 and $500 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $500 on the property transferred. What is Ashley's tax basis in the stock received in the exchange?

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?

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?

Which of the following statements best describes a section 338 transaction?

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?

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

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?

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.

A liquidated corporation always recognizes loss realized in a complete liquidation where none of the shareholders is a corporation.

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.

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

Tax considerations always are the primary reason for how an acquisition is structured.