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

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Gain reali...

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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. 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? 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?

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$164,000
The stock t...

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Which of the following statements does not describe a tax consequence to shareholders in a complete liquidation?


A) All complete liquidations are taxable to the shareholders.
B) Complete liquidations are taxable to all individual shareholders.
C) Complete liquidations are taxable to all corporate shareholders owning stock of the liquidated corporation representing less than 80 percent or more of voting power and value.
D) Complete liquidations are tax deferred to corporate shareholders owning stock of the liquidated corporation representing 80 percent or more of voting power and value.

E) A) and D)
F) None of the above

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Tax considerations are always the primary reason for structuring an acquisition.

A) True
B) False

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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) $150
B) $200
C) $250
D) $300

E) A) and C)
F) None of the above

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


A) Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer.
B) Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer.
C) Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer.
D) Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer.

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

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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) B) and C)
F) None of the above

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


A) Realization is the recording of gain or loss on a tax return.
B) Realization is the result of an exchange of property rights in a transaction.
C) Realization is the excess of amount realized over adjusted basis.
D) Realization is the excess of adjusted basis over amount realized.

E) B) and D)
F) None of the above

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The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

A) True
B) False

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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?

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$1,100,000 gain recognized and a stock b...

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Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?


A) $800
B) $600
C) $550
D) $450

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

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Han transferred land to his corporation in a section 351 transaction. Han had held the land for two years prior to the transfer. The corporation will tack Han's holding period for the land.

A) True
B) False

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Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

A) True
B) False

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Which of the following statements does not describe a requirement that must be met in a tax-deferred reverse 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 target must hold substantially all of the target corporation's properties and the properties of the acquisition subsidiary 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) None of the above
F) B) and C)

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Jalen transferred his 10 percent interest to Wolverine Company as part of a complete liquidation of the company. In the exchange, he received land with a fair market value of $100,000. Jalen's basis in the Wolverine stock was $50,000. The land had a basis to Wolverine Company of $80,000. What amount of gain does Jalen recognize in the exchange and what is his basis in the land he receives?


A) $50,000 gain recognized and a basis in the land of $100,000.
B) $50,000 gain recognized and a basis in the land of $80,000.
C) No gain recognized and a basis in the land of $80,000.
D) No gain recognized and a basis in the land of $50,000.

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

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Zhao 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. Zhao 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. The corporation also assumed a mortgage of $50,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $330,000. The transaction met the requirements to be tax-deferred under §351. a. What amount of gain or loss does Zhao realize on the transfer of the property to her corporation? b. What amount of gain or loss does Zhao recognize on the transfer of the property to her corporation? c. What is the corporation's adjusted basis in each of the assets received in the exchange? The corporation also assumed a mortgage of $50,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $330,000. The transaction met the requirements to be tax-deferred under §351. a. What amount of gain or loss does Zhao realize on the transfer of the property to her corporation? b. What amount of gain or loss does Zhao recognize on the transfer of the property to her corporation? c. What is the corporation's adjusted basis in each of the assets received in the exchange?

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a. $70,000 gain
b. Zhao does not recogni...

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Simon transferred 100 percent of his stock in Idol Company to Bobcat Corporation in a Type A merger. In exchange he received stock in Bobcat with a fair market value of $2,000,000 plus $500,000 in cash. Simon's tax basis in the Idol stock was $1,500,000. What amount of gain does Simon recognize in the exchange and what is his basis in the Bobcat stock he receives?

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$500,000 gain recognized and a tax basis...

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Which of the following statements best describes the requirement that must be met in a tax-deferred Type B stock-for-stock reorganization?


A) The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target shareholders.
B) The acquiring corporation must hold substantially all of the target's properties after the acquisition.
C) The target corporation shareholders must receive "solely" voting stock in the acquiring corporation in the exchange.
D) The target corporation shareholders must receive voting stock in the acquiring corporation in exchange for 60 percent or more of the target corporation stock.

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

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


A) $400,000 gain recognized and a basis in Otter stock of $400,000.
B) $600,000 gain recognized and a basis in Otter stock of $400,000.
C) $400,000 gain recognized and a basis in Otter stock of $600,000.
D) $600,000 gain recognized and a basis in Otter stock of $600,000.

E) B) and C)
F) None of the above

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Rich and Rita propose to have their corporation, Big Blue, acquire another corporation, Green Company, in a stock-for-stock Type B acquisition. The sole shareholder of Green, Mark Dee, will receive $500,000 of Big Blue voting stock in the transaction. Mark's tax basis in his Green stock is $100,000. What is Mark's tax basis in the Big Blue stock he receives in the exchange and what is Big Blue's basis in the Green stock it receives in return?

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Mark's basis in the Big Blue stock is $1...

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