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Exam 19: Corporate Formation,reorganization,and Liquidation

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Question 31

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Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company.In the exchange,Packard received land with a fair market value of $300,000.Packard's basis in the State stock was $600,000.The land had a basis to State Company of $500,000.What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?

A) $200,000 loss recognized by State and a basis in the land of $300,000 to Packard.
B) $200,000 loss recognized by State and a basis in the land of $500,000 to Packard.
C) No loss recognized by State and a basis in the land of $300,000 to Packard.
D) No loss recognized by State and a basis in the land of $500,000 to Packard.

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

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Question 32

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Which of the following statements best describes the tax consequences of a §338 election?

A) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets,and the buyer gets a stepped-up basis in the assets acquired.
B) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets,and the buyer gets a carryover basis in the assets acquired.
C) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets,and the buyer gets a stepped-up basis in the assets acquired.
D) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets,and the buyer gets a carryover basis in the assets acquired.

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

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Question 33

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Keegan 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 equaled the fair market value of the assets transferred to the corporation by Keegan. Assuming the gain or loss realized in this problem is deferred under §351,what is Keegan's basis in the stock he receives in his corporation?

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?

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.

Gain or loss is always recognized when realized for tax purposes.

Gary and Laura decided to liquidate their jointly owned corporation,Amelia,Inc.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 Laura recognize in the complete liquidation and what is Laura's tax basis in the building and land after the complete liquidation?

In December 2019,Zeb incurred a $100,000 loss on the sale of Pike Corporation stock that he purchased in 2010.The stock satisfied all of the §1244 stock requirements at the time of issue.In addition,Zeb reported a long-term capital gain of $40,000 in 2019.Zeb is single.How much of the loss can Zeb deduct in 2019,and what is the character of the loss?

Which of the following statements best describes the recognition of loss on property transferred to shareholders in complete liquidation of a corporation?

Which of the following classes of stock is not allowed to be used in a §351 transaction?

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

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

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 cash 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?

Ken and Jim agree to go into business together selling old comic books and records.According to the agreement,Ken will contribute inventory valued at $200,000 in return for 80 percent of the stock in the corporation.Ken's tax basis in the inventory is $100,000.Jim will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualify as organizational expenditures).The accounting services are valued at $50,000. Please answer the following questions about the tax consequences of the transaction to Jim. a.What amount of income gain or loss does Jim realize on the formation of the corporation? b.What amount of gain or loss,if any,does he recognize? c.What is Jim's tax basis in the stock he receives in return for his contribution of services to the corporation?

Which of the following statements best describes the tax consequences that arise from a contribution of capital to a corporation by an existing sole shareholder?

Jasmine transferred 100 percent of her stock in Woodward Company to Jefferson Corporation in a Type A merger.In exchange,she received stock in Jefferson with a fair market value of $600,000 plus $400,000 in cash.Jasmine's tax basis in the Woodward stock was $1,500,000.What amount of loss does Jasmine recognize in the exchange and what is her basis in the Jefferson stock she receives?

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?

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 $400,000.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?

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

Which of the following statements best describes the impact of receiving boot in a §351 transaction?