Question 1

Identify which of the following statements is false.

Accepted Answer

A taxable acquisition of a target corporation's assets does not result in the nonrecognition of gain or loss on the disposition of each individual asset. Each individual asset is still subject to gain or loss recognition.

Question 2

Identify which of the following statements is true.

Accepted Answer

D

Question 3

Tax attributes of the target corporation are lost when a Sec.338 deemed liquidation election is made.

Accepted Answer

When a Sec. 338 deemed liquidation election is made, the target corporation is treated as if it has sold all of its assets to a new corporation and then liquidated. This results in a deemed disposition of all of the target corporation's assets, which may cause the loss of tax attributes such as net operating losses and tax credits.

Question 4

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

Accepted Answer

A Type C reorganization typically involves a corporation acquiring substantially all of another corporation's assets in exchange for its own voting stock, not merely a change in identity, legal form, or state of incorporation.

Question 5

Identify which of the following statements is false.

Accepted Answer

In a taxable acquisition, the acquiring corporation is not required to acquire all of the assets and liabilities of the target corporation. It may choose to acquire only certain assets or assume only certain liabilities. However, in a tax-free acquisition, the acquiring corporation generally must acquire substantially all of the target corporation's assets and assume its liabilities.

Question 6

Advance rulings are required for all reorganizations.

Accepted Answer

Advance rulings are not required for all reorganizations. In some cases, the tax consequences of a reorganization may be clear enough to not require an advance ruling from the IRS. However, it is advisable to obtain an advance ruling for complex and high-value reorganizations to avoid any conflicts with the IRS in the future.

Question 7

In a nontaxable reorganization,shareholders of the target corporation recognize gain or loss.

Accepted Answer

In a nontaxable reorganization, shareholders of the target corporation generally do not recognize gain or loss on the exchange of their shares for those of the acquiring corporation, as long as the transaction meets specific requirements set by the IRS.

Question 8

In a Type B reorganization,the target corporation exchange their stock for the acquiring corporation's voting stock,and the target corporation remains in existence as the acquiring corporation's subsidiary.

Accepted Answer

In a Type B reorganization, the target corporation does exchange their stock for the acquiring corporation's voting stock, and the target corporation remains in existence as the acquiring corporation's subsidiary.

Question 9

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 10

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

Accepted Answer

Taxable acquisition transactions can take the form of either asset purchases or stock purchases. The tax consequences of each type of transaction can differ significantly, and careful planning is necessary to ensure that the transaction is structured in a tax-efficient manner.

Question 11

In a Type B reorganization,the acquiring corporation obtains substantially all of the target corporation's assets in exchange for its voting stock and a limited amount of other consideration.

Accepted Answer

The answer of In a Type B reorganization,the acquiring corporation...

Question 12

In a nontaxable reorganization,the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

Accepted Answer

In a nontaxable reorganization, the acquiring corporation's holding period for the acquired assets includes the period during which the assets were held by the transferor, effectively backdating the start of the holding period to before the transaction date.

Question 13

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

Accepted Answer

Axle Corporation's basis in the Drexel Corporation stock will be the amount paid for the stock ($500,000). The adjusted basis and FMV of Drexel Corporation's assets, as well as the shareholders' purchase price of the stock, are not relevant to Axle Corporation's basis in the stock.

Question 14

The Sec.338 deemed sale rules require that 70% of the target corporation's stock be owned.

Accepted Answer

The Sec. 338 deemed sale rules require that a purchasing corporation acquire at least 80% of the target corporation's stock, by vote and value, within a 12-month period.

Question 15

In a triangular Type A merger,the acquiring subsidiary corporation must obtain substantially all of the target corporation's assets.

Accepted Answer

In a triangular Type A merger, the acquiring subsidiary corporation indeed must obtain substantially all of the target corporation's assets, as this is a characteristic of Type A mergers, where the merger is structured through the subsidiary.

Question 16

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

Accepted Answer

The answer of The acquiring corporation does not recognize gain...

Question 17

In a nontaxable reorganization,the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

Accepted Answer

According to the rules of a nontaxable reorganization, the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered. This is known as the continuity of interest principle.

Question 18

Type A reorganizations include mergers and consolidations.

Accepted Answer

Type A reorganizations, also known as statutory mergers or consolidations, involve the complete absorption of one corporation by another, with only the surviving corporation retaining its legal existence.

Question 19

In a taxable asset acquisition,the purchaser does not acquire unknown and contingent liabilities.

Accepted Answer

In a taxable asset acquisition, the purchaser only acquires the specific assets identified in the transaction, and any known and existing liabilities associated with those assets. Unknown and contingent liabilities typically remain the responsibility of the seller.

Question 20

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Quiz 13: Corporate Acquisitions and Reorganizations

Identify which of the following statements is false.

Identify which of the following statements is true.

Tax attributes of the target corporation are lost when a Sec.338 deemed liquidation election is made.

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

Identify which of the following statements is false.

Advance rulings are required for all reorganizations.

In a nontaxable reorganization,shareholders of the target corporation recognize gain or loss.

In a Type B reorganization,the target corporation exchange their stock for the acquiring corporation's voting stock,and the target corporation remains in existence as the acquiring corporation's subsidiary.

Identify which of the following statements is false.

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

In a Type B reorganization,the acquiring corporation obtains substantially all of the target corporation's assets in exchange for its voting stock and a limited amount of other consideration.

In a nontaxable reorganization,the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

The Sec.338 deemed sale rules require that 70% of the target corporation's stock be owned.

In a triangular Type A merger,the acquiring subsidiary corporation must obtain substantially all of the target corporation's assets.

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

In a nontaxable reorganization,the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

Type A reorganizations include mergers and consolidations.

In a taxable asset acquisition,the purchaser does not acquire unknown and contingent liabilities.

Identify which of the following statements is true.