Question 1

Pursuant to a complete liquidation, Lilac Corporation distributes the following assets to its unrelated shareholders: land held for three years as an investment (basis of $300,000, fair market value of $600,000) , inventory (basis of $100,000, fair market value of $80,000) , and marketable securities held for four years as an investment (basis of $200,000, fair market value of $240,000) . What are the tax consequences to Lilac Corporation as a result of the liquidation?

Accepted Answer

A)   Lilac Corporation would recognize no gain or loss on the liquidation.
B)   Lilac Corporation would recognize a net capital gain of $320,000.
C)   Lilac Corporation would recognize a net capital gain of $340,000 and an ordinary loss of $20,000.
D)   Lilac Corporation would recognize a net capital gain of $340,000.
E)   None of the above.F) B) and D)
G) A) and B)

Question 2

During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $250,000, a fair market value of $650,000, and is subject to a liability of $500,000. Kena, who takes the land subject to the liability, has a basis of $120,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?

Accepted Answer

A)   Kena recognizes a gain of $530,000.
B)   Ecru Corporation recognizes a gain of $250,000.
C)   Kena recognizes a gain of $30,000.
D)   Kena has a basis of $250,000 in the land.
E)   None of the above.F) A) and E)
G) A) and C)

Question 3

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 4

Which of the following statements is true?

Accepted Answer

A)   The dollar amounts involved in reorganizations are generally substantial? thus, it is important that the financial and tax treatment of the reorganization is consistent.
B)   A letter ruling indicates the income tax treatment the IRS will apply to the proposed corporate restructuring transaction.
C)   Careful planning can ensure that all gains recognized by individual shareholders receive beneficial dividend treatment.
D)   None of the statements is true.E) B) and C)
F) All of the above

Question 5

Explain whether shareholders are exempted from gain/loss recognition in nontaxable corporate reorganization or the gain/loss recognition is merely postponed. If postponed, what is the vehicle for ensuring the postponed gain/loss will be recognized in the future?

Accepted Answer

In reorganizations, neither gain nor los...

Question 6

The stock in Rhea Corporation is owned by Jennifer (80%)  and Lucy (20%) , mother and daughter. In a liquidation of the corporation in the current year, Rhea distributes land that it purchased two years ago for $675,000 to Lucy. The property has a fair market value on the date of distribution of $450,000. One year later, Lucy sells the land for $400,000. What loss, if any, will Rhea Corporation recognize with respect to the distribution of land?

Accepted Answer

A)   $0
B)   $45,000
C)   $225,000
D)   $275,000
E)   None of the aboveF) B) and E)
G) A) and C)

Question 7

Section 332 can apply to a parent-subsidiary liquidation even if the subsidiary corporation is insolvent on the date of the liquidation.

Accepted Answer

A) True 
 B)False

Question 8

The tax treatment of reorganizations almost parallels the Federal income tax treatment for like-kind exchanges.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

All of the following statements are true about corporate reorganization except:

Accepted Answer

A)   Taxable amounts for shareholders are classified as a dividend or capital gain.
B)   Reorganizations receive treatment similar to corporate formations under § 351.
C)   The transfers of stock to and from shareholders qualify for like-kind exchange treatment.
D)   The value of the stock received by the shareholder less the gain not recognized (postponed)  will equal the shareholder's basis in the stock received.
E)   All of the above statements are true.F) All of the above
G) A) and E)

Question 11

The basis for the acquiring corporation in the target's assets is increased by any gain recognized by the target.

Accepted Answer

A) True 
 B)False

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

Correct Answer
verified

The tax treatment of reorganizations almost parallels the Federal income tax treatment for like-kind exchanges.

Correct Answer
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Correct Answer
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Which of the following statements is true?

Correct Answer
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Section 332 can apply to a parent-subsidiary liquidation even if the subsidiary corporation is insolvent on the date of the liquidation.

Correct Answer
verified

Explain whether shareholders are exempted from gain/loss recognition in nontaxable corporate reorganization or the gain/loss recognition is merely postponed. If postponed, what is the vehicle for ensuring the postponed gain/loss will be recognized in the future?

Correct Answer
verified
In reorganizations, neither gain nor los...
View Answer

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

Correct Answer
verified

Correct Answer
verified

The basis for the acquiring corporation in the target's assets is increased by any gain recognized by the target.

Correct Answer
verified

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

Correct Answer
verified

All of the following statements are true about corporate reorganization except:

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

The tax treatment of reorganizations almost parallels the Federal income tax treatment for like-kind exchanges.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Section 332 can apply to a parent-subsidiary liquidation even if the subsidiary corporation is insolvent on the date of the liquidation.

Correct AnswerverifiedShow Answer

Explain whether shareholders are exempted from gain/loss recognition in nontaxable corporate reorganization or the gain/loss recognition is merely postponed. If postponed, what is the vehicle for ensuring the postponed gain/loss will be recognized in the future?

Correct AnswerverifiedIn reorganizations, neither gain nor los...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The basis for the acquiring corporation in the target's assets is increased by any gain recognized by the target.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All of the following statements are true about corporate reorganization except:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In reorganizations, neither gain nor los...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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