Question 1

One of the tenets of the U.S.tax policy is to ____________________ business development.As an extension of this concept,corporate restructurings are given ____________________ treatment.
or

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Question 2

Present Value Tables needed for this question.Tony is the sole shareholder of Create Corporation.Tony is a chemical engineer and has been working hard to create a unique product but has been unsuccessful.Thus,Create has accumulated an NOL of $240,000.This year she finally finds the right combination for a new cleaning product.Predicting that Create will be very profitable next year,Create borrows $250,000 to pay Tony the salary she rightly deserves.Next year,Create does become profitable,earning $100,000 before application of carryovers.Mega Corporation,a huge ($50 million value,35% tax bracket)competitor,offers to purchase the patent from Tony for $750,000.Knowing that the Create's NOL should be useful to Mega,Tony suggests a restructuring where she receives $500,000 in Mega stock,Mega assumes all of Create's liabilities ($250,000),plus $75,000 cash for the NOL.Mega counter offers with cash for the NOL (to be determined),and $750,000 of stock.It will not assume any liabilities.How much would be the maximum cash offered by Mega for the NOL,assuming that Mega uses an 11% discount factor and the Federal long-term tax-exempt rate is 4%? If Tony accepts Mega's offer,what type of reorganization,if any,is this restructuring?

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Question 3

The ____________________ doctrine treats several transactions as if they were one transaction when they are all integrated.The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

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Question 4

The acquisitive "Type D" reorganization differs from other restructurings in that the entity that transfers its assets is the ____________________ corporation and the ____________________ corporation is the successor corporation.

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Question 5

When tax attributes are carried over from a loss target corporation to the acquiring corporation,the NOLs are utilized ____________________ (before/after)capital losses.

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Question 6

An equity structure shift occurs when a(n)____________________ causes an ownership change of ____________________ percentage-points for any common shareholders owning at least 5%.A sale or issuance of stock can cause a(n)____________________ to take place.

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Question 7

Pipe Corporation is very interested in acquiring all of Ore Corporation.It currently owns 30%,which it purchased 6 years ago for $250,000.Pipe is a manufacturer of plumbing pipes with assets valued at $3 million and liabilities of $1 million.Ore supplies Pipe with copper from its mines that are valued at $4 million with $3 million in mortgages.Pipe negotiates the restructuring with Ore's management.Pipe is concerned about potential environmental issues from the strip mining used by Ore and feels it needs liability protection.

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Question 8

To qualify as a tax-free reorganization,a corporate restructuring must meet not only the specific requirements of § 368 but also four general requirements.These four requirements are: ____________________,____________________,____________________,and _________________________.In addition,the ____________________ doctrine should not apply to the reorganization.
or

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Question 9

Cocoa Corporation is acquiring Milk Corporation in a "Type A" reorganization by exchanging 40% of its voting stock and $50,000 for all of Milk's assets (value of $850,000 and basis of $600,000)and liabilities ($200,000).The shareholders of Milk are Elsie (650 shares)and Ferdinand (350 shares).They bought their stock for $500 per share.What is the value of the stock that Elsie and Ferdinand received from Cocoa? What is the amount of gains or losses they will recognize due to the reorganization and what is their basis in the Cocoa stock?

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Question 10

____________________ is other property received along with stock in a restructuring falling under § 368.If the shareholders receive the other property,it can be taxed as ____________________ or ____________________.
.
or

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Question 11

In a ____________________ divisive reorganization,some of the stock in the original entity is exchanged for stock in the new corporation.In a ____________________ divisive reorganization,the shareholders do not give up any of their original corporation stock to receive stock in the new corporation,whereas in a ____________________ divisive reorganization,the original distributing corporation disappears.

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The answer of In a ____________________ divisive reorganization,some of the...

Question 12

A "Type A" reorganization that is the union of two or more corporations with one retaining its existence is called a ____________________.A ____________________ is when a new corporation is created to take the place of two or more corporations.

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Question 13

The ____________________ provides a restriction on the amount of tax attributes that can be carried over from the target to the acquiring corporation after an ownership shift occurs.
or
or

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Question 14

For a "Type C" reorganization,substantially all of the assets means at least ____________________ percent of the net asset value and ____________________ percent of the gross asset value.

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Question 15

The ____________________ doctrine ensures that the acquiring corporation cannot immediately sell the target corporation assets it receives in the reorganization.The ____________________ doctrine also prevents transactions that appear to be sales from qualifying as nontaxable reorganizations.However,these are sales by the target shareholders to the acquiring corporation.

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Question 16

The yearly § 382 limitation is computed by multiplying the ____________________ of the loss corporation's stock on the ____________________ date by the ____________________.For the ____________________,the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year.
or
or

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Question 17

Lyon has 100,000 shares outstanding that are worth $10 per share.It uses 32% of its stock plus $80,000 to acquire Zebra Corporation in a "Type A" reorganization.Zebra's assets are valued at $400,000 and its accumulated earnings and profits are $25,000 at the time of the reorganization.The Lyon shares and cash are distributed to the Zebra shareholders as follows.Jake (owning 62.5% of Zebra)receives 18,000 shares (value $180,000)and $70,000.Kara (owning 37.5% of Zebra)receives 14,000 shares (value $140,000)and $10,000.Jake and Kara each recognize gains to the extent of the cash they received.What is the character of Jake's and Kara's gains?

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Question 18

The tax treatment of the parties involved in a tax-free reorganization almost exactly parallels the treatment under the ____________________ provisions.When boot is received,____________________ may be recognized but ____________________ is not recognized.

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Question 19

Present Value Tables needed for this question.Avocado Corporation wants to acquire Tomato Corporation because their businesses are complementary and Tomato has unused business credits of $63,000.Avocado is a manufacturer with a basis in its assets of $2.4 million (value of $3.1 million)and liabilities of $600,000.It is in the 35% tax bracket and uses a 10% discount factor when making investments.However,the Federal long-term tax-exempt rate is only 5%.Tomato is a distributor of a variety of products including those of Avocado's.Its basis in its assets is $2 million (value of $1.5 million)and has liabilities of $400,000.Avocado is willing to acquire only $1 million of Tomato's assets and all its liabilities for stock and $100,000 cash.Tomato will distribute its remaining assets,cash,and Avocado stock to its shareholders in exchange for their stock and then liquidate.

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Question 20

The acquiring corporation in a "Type G" reorganization must reduce the tax attributes carried over to it to the extent of the ____________________ relief.

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Quiz 7: Corporations: Reorganizations

One of the tenets of the U.S.tax policy is to business development.As an extension of this concept,corporate restructurings are given treatment. or

The doctrine treats several transactions as if they were one transaction when they are all integrated.The doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

The acquisitive "Type D" reorganization differs from other restructurings in that the entity that transfers its assets is the corporation and the corporation is the successor corporation.

When tax attributes are carried over from a loss target corporation to the acquiring corporation,the NOLs are utilized ____________________ (before/after)capital losses.

An equity structure shift occurs when a(n) causes an ownership change of percentage-points for any common shareholders owning at least 5%.A sale or issuance of stock can cause a(n) to take place.

To qualify as a tax-free reorganization,a corporate restructuring must meet not only the specific requirements of § 368 but also four general requirements.These four requirements are: ________,,,and _.In addition,the ________ doctrine should not apply to the reorganization. or

is other property received along with stock in a restructuring falling under § 368.If the shareholders receive the other property,it can be taxed as or . . or

A "Type A" reorganization that is the union of two or more corporations with one retaining its existence is called a .A is when a new corporation is created to take the place of two or more corporations.

The ____________________ provides a restriction on the amount of tax attributes that can be carried over from the target to the acquiring corporation after an ownership shift occurs. or or

For a "Type C" reorganization,substantially all of the assets means at least percent of the net asset value and percent of the gross asset value.

The yearly § 382 limitation is computed by multiplying the of the loss corporation's stock on the date by the .For the ,the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year. or or

The tax treatment of the parties involved in a tax-free reorganization almost exactly parallels the treatment under the provisions.When boot is received, may be recognized but is not recognized.

The acquiring corporation in a "Type G" reorganization must reduce the tax attributes carried over to it to the extent of the ____________________ relief.

Quiz 7: Corporations: Reorganizations

One of the tenets of the U.S.tax policy is to ____________________ business development.As an extension of this concept,corporate restructurings are given ____________________ treatment. or

The ____________________ doctrine treats several transactions as if they were one transaction when they are all integrated.The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

The acquisitive "Type D" reorganization differs from other restructurings in that the entity that transfers its assets is the ____________________ corporation and the ____________________ corporation is the successor corporation.

When tax attributes are carried over from a loss target corporation to the acquiring corporation,the NOLs are utilized ____________________ (before/after)capital losses.

An equity structure shift occurs when a(n)____________________ causes an ownership change of ____________________ percentage-points for any common shareholders owning at least 5%.A sale or issuance of stock can cause a(n)____________________ to take place.

____________________ is other property received along with stock in a restructuring falling under § 368.If the shareholders receive the other property,it can be taxed as ____________________ or ____________________. . or

A "Type A" reorganization that is the union of two or more corporations with one retaining its existence is called a ____________________.A ____________________ is when a new corporation is created to take the place of two or more corporations.

The ____________________ provides a restriction on the amount of tax attributes that can be carried over from the target to the acquiring corporation after an ownership shift occurs. or or

For a "Type C" reorganization,substantially all of the assets means at least ____________________ percent of the net asset value and ____________________ percent of the gross asset value.

The tax treatment of the parties involved in a tax-free reorganization almost exactly parallels the treatment under the ____________________ provisions.When boot is received,____________________ may be recognized but ____________________ is not recognized.

The acquiring corporation in a "Type G" reorganization must reduce the tax attributes carried over to it to the extent of the ____________________ relief.

One of the tenets of the U.S.tax policy is to business development.As an extension of this concept,corporate restructurings are given treatment. or

The doctrine treats several transactions as if they were one transaction when they are all integrated.The doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

The acquisitive "Type D" reorganization differs from other restructurings in that the entity that transfers its assets is the corporation and the corporation is the successor corporation.

An equity structure shift occurs when a(n) causes an ownership change of percentage-points for any common shareholders owning at least 5%.A sale or issuance of stock can cause a(n) to take place.

is other property received along with stock in a restructuring falling under § 368.If the shareholders receive the other property,it can be taxed as or . . or

A "Type A" reorganization that is the union of two or more corporations with one retaining its existence is called a .A is when a new corporation is created to take the place of two or more corporations.

For a "Type C" reorganization,substantially all of the assets means at least percent of the net asset value and percent of the gross asset value.

The tax treatment of the parties involved in a tax-free reorganization almost exactly parallels the treatment under the provisions.When boot is received, may be recognized but is not recognized.