Solved by verified expert :659. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #21
Rabbit Corporation and Fox Corporation would like to merge into one company.
Rabbit’s only asset is a nontransferable chemical process that has a value of
$300,000 and Rabbit has liabilities of $100,000. Fox has the manufacturing
plant and experience in the production of Rabbit’s chemical process. Its
manufacturing plant has a value of $900,000 with a mortgage of $200,000. Which
type of reorganization would be the most appropriate for Rabbit and Fox?
a.
“Type A” consolidation reorganization.
b. “Type B” reorganization.
c. “Type C” reorganization.
d. Acquisitive “Type D” reorganization.
e. None of the above is appropriate.
660. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #22
In which type of divisive corporate reorganization do the shareholders receive
stock in another corporation without relinquishing any of their stock in the
original corporation?
a.
“Type A” consolidation reorganization.
b. “Type D” split-up reorganization.
c. “Type D” split-off reorganization.
d. “Type D” spin-up reorganization.
e. Some other type of reorganization.
661. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #23
Dirty Corporation has owned two chemical manufacturing facilities for the last
20 years. One facility is located in Oklahoma while the other is in Oregon.
There have been some environmental investigations at the Oregon facility.
Therefore, Dirty creates a new corporation, called Clean, and places the assets
of the Oregon plant into Clean in exchange for all of Clean’s stock. Dirty
distributes this stock proportionately to its shareholders in exchange for 40%
of their Dirty stock. How will this transaction be treated for tax purposes?
a.
As a split-up “Type D” reorganization.
b. As a split-off “Type D”
reorganization.
c. As a spin-off “Type D”
reorganization.
d. This transaction does not qualify as
a reorganization, because Dirty does not have two active lines of business.
e. None of the above.
662. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #24
Contra Corporation is owned 50% by Terry and 50% by Sammy. Due to news articles
damaging Contra’s reputation, Terry and Sammy decide to liquidate Contra, which
has been in existence for 4 years. They create Alpha and Beta Corporations to
receive all of the manufacturing assets of Contra’s two picture frame plants.
Alpha receives the urban plant manufacturing assets and Beta receives the
country manufacturing plant. Terry receives 60% Alpha stock and 40% of the Beta
stock and Sammy receives 40% Alpha stock and 60% of the Beta stock. Terry and
Sammy turn in their Contra stock and Contra then liquidates. Assuming all other
requirements are met, how will this transaction be treated for tax purposes?
a.
As a taxable transaction.
b. As a “Type A” deconsolidation.
c. As a “Type D” split-off
reorganization.
d. As a “Type D” split-up
reorganization.
e. None of the above.
663. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #25
Vintage Corporation has four shareholders: Robin, Quinton, Paula, and Orvil.
Paula and Orvil started the business 10 years ago, and Robin and Quinton bought
their stock 6 years ago. Vintage’s historical business is buying and selling
antiques. When Robin and Quinton joined Vintage, it added a new business,
trading in collectibles.
Lately, there has been a disagreement about the future of Vintage. Orvil and
Quinton are not interested in collectibles, but Robin and Paula enjoy this part
of the business. To resolve this issue, Paula suggests that two new
corporations be created, Antique and Collectible. Antique would receive all of
the assets of the antique part of the business, and Collectible would receive
all of the assets of the collecting part of Vintage. All of the stock of these
two corporations would be received by Vintage and distributed to the
appropriate shareholders. Vintage would then terminate.
a.
The transaction qualifies as a spin-off “Type D” reorganization.
b. The transaction qualifies as a split-off
“Type D” reorganization.
c. The transaction qualifies as a
split-up “Type D” reorganization.
d. The transaction is taxable.
e. None of the above.
664. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #26
ScottishCo is owned by Gordon Bryson and his four nieces and nephews. Gordon
owns all the voting stock. He wants to relinquish control; accordingly,
ScottishCo redeems all of Gordon’s voting common stock and issues him preferred
stock and $50,000 in bonds. The nonvoting preferred shares owned by the nieces
and nephew are exchanged for voting common stock. Which of the following
statements is correct?
a.
None of this transaction is taxable because it qualifies as a “Type E”
reorganization.
b. The exchange of common for preferred
is not taxable but the exchange of preferred stock for common stock is taxable.
c. The exchange of common stock for a
bond is taxable.
d. All of these transactions are
taxable.
e. None of the above statements is
correct.
665. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #27
Qadira exchanges 40% of her common stock for 80% of newly issued preferred
stock in the Pinto Corporation. There was no Pinto preferred stock previously
outstanding, and Qadira received only stock. The other 20% of the preferred
stock was received by another shareholder, solely in exchange for 10% of his
common stock in Pinto. How is this transaction treated for tax purposes?
a.
This is a taxable transaction.
b. This transaction qualifies as a “Type
E” reorganization.
c. This transaction qualifies as a “Type
B” reorganization.
d. This transaction qualifies as
like-kind exchange.
e. None of the above.
666. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #28
Western, Inc. is a corporation located in California. In June of the current year,
Western moves to Georgia and changes its name to Southern Corporation. Its sole
shareholder, Dharma, exchanges all of her stock in Western and receives all of
the stock in Southern.
a.
This transaction qualifies as a “Type F” reorganization.
b. This transaction qualifies as a “Type
E” reorganization.
c. This move has no tax significance for
Federal purposes.
d. This is treated as a liquidation of
Western and incorporation of Southern. Thus, gain can be recognized on the
liquidation of Western.
e. None of the above.
667. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #29
Loser Corporation has outstanding bonds of $800,000 and assets valued at
$600,000. It also has a $200,000 NOL and capital loss carryovers of $160,000.
Loser is solely owed by Dai Won. Loser is restructured and the successor
company is LouderCo. Which of the following statements is false?
a.
This transaction qualifies as a “Type G” reorganization.
b. LouderCo can utilize the full amount
of Loser’s NOL and capital loss carryover, if it elects to reduce the basis in
the transferred depreciable assets by the amount of the debt relief it
receives.
c. Dai Won must receive a controlling
interest in LouderCo for the restructuring to qualify as a tax-free
reorganization.
d. The bondholders of Loser become
shareholders of LouderCo.
e. All of the above statements are true.
668. CHAPTER
7—CORPORATIONS: REORGANIZATIONS Question MC #30
In which type of reorganization could bonds and other liabilities be exchanged
for stock and not be treated as boot?
a.
A “Type G” reorganization.
b. A “Type E” reorganization.
c. An acquisitive “Type D”
reorganization.
d. A “Type A” consolidation.
e. None of the above.
