Question 1

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

The holding period for stock received in a nontaxable reorganization includes the holding period of the stock surrendered. This is known as the "continuity of interest" requirement.

Question 2

Advance rulings are required for all reorganizations.

Accepted Answer

Advance rulings are not required for all reorganizations. However, it is advisable to seek an advance ruling in certain situations to clarify the tax consequences and ensure compliance with the tax laws.

Question 3

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 4

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 do not require any specific percentage of ownership in the target corporation's stock.

Question 5

Type A reorganizations include mergers and consolidations.

Accepted Answer

Type A reorganizations are defined as mergers and consolidations, among other corporate transactions.

Question 6

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

Accepted Answer

Taxable acquisition transactions can indeed be either a purchase of assets or a purchase of stock. In a purchase of assets, the buyer acquires specific assets of the target company, such as inventory, equipment, or real estate. In a purchase of stock, the buyer acquires ownership of the target company itself, including all assets, liabilities, and obligations. Both types of transactions can have tax implications for both the buyer and the seller.

Question 7

Identify which of the following statements is false.

Accepted Answer

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

Question 8

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 asset is still subject to its own gain or loss recognition rules.

Question 9

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

Accepted Answer

The answer of In a taxable asset acquisition,the purchaser does...

Question 10

Identify which of the following statements is true.

Accepted Answer

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

Question 11

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 12

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 sold all of its assets and then liquidated. This results in a deemed realization of the target corporation's built-in gains and losses, which may result in the loss of tax attributes such as net operating losses, credits, and capital losses.

Question 13

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 14

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's stock is exchanged for the acquiring corporation's voting stock, and the target corporation continues to operate as a subsidiary of the acquiring corporation.

Question 15

Identify which of the following statements is false.

Accepted Answer

An acquiring corporation in a taxable acquisition transaction does not necessarily have 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.

Question 16

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 17

Identify which of the following statements is true.

Accepted Answer

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

Question 18

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 19

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 is equal to the amount paid for the stock, which is $500,000 in cash. The adjusted basis and FMV of the underlying assets do not affect the basis of the stock.

Question 20

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...

Quiz 13: Corporate Acquisitions and Reorganizations

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

Advance rulings are required for all reorganizations.

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

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

Type A reorganizations include mergers and consolidations.

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

Identify which of the following statements is false.

Identify which of the following statements is false.

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

Identify which of the following statements is true.

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

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

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.

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.

Identify which of the following statements is true.

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