FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 7: Corporate Acquisitions and Reorganizations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Identify which of the following statements is true.

A) The total basis of the target corporation's assets following a Sec. 338 election in general equals the amount paid for the target corporation's stock minus the target corporation's liabilities.
B) The residual method ensures that any premium paid for the target stock is reflected in depreciable assets.
C) The allocation of the total basis of the target corporation's assets to the individual assets following a Sec. 338 election occurs under the residual method.
D) All of the above are false.

E) A) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Identify which of the following statements is true.

A) When the acquiring corporation makes the Sec. 338 election, the target corporation is treated in many respects as a new corporation.
B) A Sec. 338 election requires the adoption of the old target corporation's tax year by the new target corporation.
C) Tax attributes of the target corporation are not lost when a Sec. 338 deemed liquidation election is made.
D) All of the above are false.

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

Correct Answer

verified

Show Answer

Question 53

Essay

Review LaterAdd Note

Parent Corporation purchases all of Target Corporation's stock for $200,000 and makes a deemed liquidation election.Target Corporation has Class I assets with an adjusted basis of $55,000 and an FMV of $55,000; Class II assets with an adjusted basis of $40,000 and an FMV of $60,000; and Class V assets with an adjusted basis of $70,000 and an FMV of $100,000.The Class V assets are subject to a $20,000 liability.Assume a 34% corporate tax rate.What is the adjusted grossed-up basis of Target Corporation's stock?

Identify which of the following statements is false.

Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash.Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV.The assets are subject to $200,000 in liabilities.Drexel Corporation shareholders purchased their stock eight years ago for $300,000.Axle Corporation's basis in the Drexel Corporation stock is

Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation.Immediately after the incorporation, Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock.Motor Corporation is liquidated.Which of the following statements is correct?

Which one of the following is not a corporate reorganization as defined in the Internal Revenue Code?

Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV) of securities.The assets have an adjusted basis of $600,000 and an FMV of $1,500,000.In addition, Acme Corporation assumes $500,000 of Fisher's liabilities.At the time of the transfer, Acme's E&P is $400,000.Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock.After the reorganization, Barbara owns 25% of Acme's stock.Barbara has an adjusted basis of $400,000 in her Fisher stock.Barbara's basis for her Acme securities is

Pacific Corporation acquires 80% of the stock of Jackson Corporation for $3,000,000 in the current year.Jackson's assets have a basis of $2,000,000 and its liabilities are $800,000.The assets are worth $3,500,000.What gain is recognized by Jackson Corporation on the deemed sale of its assets if a Sec.338 election is made?

Buddy owns 100 of the outstanding shares of Binder Corporation stock.Buddy's basis in his Binder Corporation stock is $100,000.Binder Corporation is merged with Clipper Corporation in a tax-free reorganization.Buddy receives 50 shares of Clipper stock worth $150,000 and $150,000 cash.The remaining 100 shares of Binder stock were owned by Bruce who received the same consideration for his Binder stock.Binder and Clipper have E&P balances of $250,000 and $500,000, respectively.Buddy and Bruce each own 25% of Clipper Corporation's 200 shares of stock after the reorganization.Which of the following is correct?

Identify which of the following statements is true.

A Type C reorganization is a change in identity, legal form, or state of incorporation in which the shareholders retain the same equity interest.

Gulf Corporation wants to acquire all of Beamer Corporation's assets and liabilities in a Type C reorganization.The FMV of Beamer's assets is $500,000.Beamer's liabilities are $70,000.How much cash can Gulf Corporation use to pay for Beamer's assets without violating the Type C reorganization requirements?

Paris Corporation has E&P of $200,000.Paris owns all of Slider Corporation's stock, which is worth $80,000.The stock has been held for five years.Paris distributes all of the Slider stock and $20,000 cash to a 50% shareholder in exchange for all of the shareholder's 100 shares of Paris stock.The exchange qualifies as a Sec.355 split-off transaction.The 50% shareholder's basis in the Paris stock surrendered is $90,000.What is the amount of the gain that the 50% shareholder must recognize?

Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000.The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation.Frank's basis in the Baxter stock he surrenders is $120,000.What is Duke Corporation's basis in the assets it receives?

Identify which of the following statements is true.

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

In Fall 1999, Ford Motor Company's board of directors announced the $25.8 billion spin-off of its 80.7% interest in the Associated First Capital Corporation finance unit to the Ford shareholders.Ford said that it would distribute about $22.7 billion in Associates shares to its holders of Ford common and Class B stock, and $3.1 billion in cash to shareholders who hold Ford stock in U.S.employee savings accounts.According to market observers who track Ford operations, the spin-off is one of several moves Ford has taken to increase shareholder value by selling off nonautomotive assets, moves that included the initial public offering in April 1999 of Hertz Corporation.Ford said that it will take a one-time, noncash, nontaxable gain of about $16.5 billion in the first quarter as a result of the spin-off.What tax issues should the parties to the divisive transaction consider?

Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock.Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation.After the acquisition, Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value) .The transaction is classified as a