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Exam 19: Corporate Formation, Reorganization, and Liquidation

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Question 51

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Gain and loss realized in a section 351 transaction will be recognized if the taxpayer receives boot in the exchange.

A) True
B) False

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Question 52

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The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.

A) True
B) False

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Question 53

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

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

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?

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in a transaction.

Please answer the following questions about the tax consequences of the transaction to Ken. a) What amount of gain or loss does Ken realize on the formation of the corporation? b) What amount of gain or loss, if any, does he recognize? c) What is Ken's tax basis in the stock he receives in return for his contribution of property to the corporation?

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600. In addition, Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process. Which of the following statements best describes the tax result to Sami because of the exchanges?

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 section 338 transaction is a stock acquisition that is treated as an asset acquisition based on an election made by the acquirer.

A stock-for-stock Type B reorganization will be tax-deferred to a target corporation shareholder as long as at least 80 percent of the consideration received is in the form of stock of the acquirer.

Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchange.

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Francine 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. $\begin{array} { l r l r } & { \text { FMV } } & & { \text { Adjusted basis } } \\\text { Inventory } & \$ 30,000 & & \$ 10,000 \\\text { Building } & 130,000 & & 80,000 \\\text { Land } & \underline { 50,000 } & & \underline { 100,000 } \\\text { Total } & \$ 210,000 & & \$ \underline { \underline { 190,000 } }\end{array}$ The corporation also assumed a mortgage of $60,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $150,000. What is Francine's basis in the stock she receives in her corporation?

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?

Assuming the gain or loss realized in Problem 1 is deferred under §351, what is Keegan's basis in the stock he receives in his corporation?

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