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Question;Section 351;(which permits transfers to controlled corporations to be tax deferred) can be;justified under the wherewithal to pay concept.;a.;True;b. False;302. Que 2;Similar to like-kind exchanges, the receipt of ?boot? under ? 351 can cause;loss to be recognized.;a.;True;b. False;303. Que 3;Tina incorporates her sole proprietorship with assets having a fair market;value of $100,000 and an adjusted basis of $110,000. Even though ? 351 applies;Tina may recognize her realized loss of $10,000.;a.;True;b. False;304. Que 4;In a ? 351 transfer, a shareholder receives boot of $10,000 but ends up with a;realized loss of $3,000. Only $7,000 of the boot will be taxed to the;shareholder.;a.;True;b. False;305. Que 5;In a ? 351 transfer, the receipt of boot is not taxed if the shareholder has a;realized loss.;a.;True;b. False;306. Que 6;In a ? 351 transfer, gain will be recognized to the extent of the lesser of;realized gain or the boot received.;a.;True;b. False;307. Que 7;Allen transfers marketable securities with an adjusted basis of $120,000, fair;market value of $300,000, for 85% of the stock of Heron Corporation. In;addition, he receives cash of $40,000. Allen recognizes a capital gain of;$40,000 on the transfer.;a.;True;b. False;308. Que 8;The definition of property for purposes of ? 351 includes unrealized;receivables transferred by a cash basis taxpayer.;a.;True;b. False;309. Que 9;The transfer of an installment obligation in a transaction qualifying under;351 is a disposition of the obligation that causes gain to be recognized by the;transferor.;a.;True;b. False;310. Que10;A secret process and patentable invention both constitute ?property? for;purposes of ? 351.;a.;True;b. False;311. Que11;Since services are not considered property under ? 351, a taxpayer must report;as income the fair market value of stock received for such services.;a.;True;b. False;312. Que12;The receipt of securities (i.e., long-term debt) in exchange for the transfer;of appreciated property to a controlled corporation results in recognition of;realized gain to the transferor.;a.;True;b. False;313. Que13;In a ? 351;transaction, if a transferor receives consideration other than stock, the;transaction can be taxable.;a.;True;b. False;314. Que14;The receipt of nonqualified preferred stock in exchange for the transfer of;appreciated property to a controlled corporation results in recognition of gain;to the transferor.;a.;True;b. False;315. Que15;Jill transfers property worth $200,000 (basis of $190,000) to Blue Corporation.;In return, she receives 80% of the stock in Blue Corporation (fair market value;of $180,000) and a long-term note, executed by Blue and made payable to Jill;(fair market value of $20,000). Jill recognizes gain of $20,000 on the;transfer.;a.;True;b. False;316. Que16;Three individuals form Skylark Corporation with the following contributions;Cliff, cash of $50,000 for 50 shares, Brad, land (fair market value of $20,000);for 20 shares, and Ron, cattle (fair market value of $9,000) for 9 shares and;services (fair market value of $21,000) for 21 shares. Section 351 will not;apply in this situation because the control requirement has not been satisfied.;a.;True;b. False;317. Que17;In order to retain the services of Bonnie, a key employee in Ralph?s sole;proprietorship, Ralph contracts with Bonnie to make her a 25% owner. Ralph;incorporates the business receiving in return 100% of the stock. Three days;later, Ralph transfers 25% of the stock to Bonnie. Under these circumstances;351 will not apply to the incorporation of Ralph?s business.;a.;True;b. False;318. Que18;One month after Sally incorporates her sole proprietorship, she gives 25% of;the stock to her children. Section 351 cannot apply to Sally because she has;not satisfied the 80% control requirement.;a.;True;b. False;319. Que19;A person who performs services for a corporation in exchange for stock cannot;be treated as a member of the transferring group even if that person also;transfers some property to the corporation.;a.;True;b. False;320. Que20;The use of ? 351 is not limited to the initial formation of a corporation, and;it can apply to later transfers as well.;a.;True;b. False;321. Que21;The bona fide business requirement of ? 357(b) is easily satisfied as long as;the liability arose in the normal course of conducting the business that is;incorporated.;a.;True;b. False;322. Que22;When incorporating her sole proprietorship, Samantha transfers all of its;assets and liabilities. Included in the $30,000 of liabilities assumed by the;corporation is $500 that relates to a personal expenditure. Under these;circumstances, the entire $30,000 will be treated as boot.;a.;True;b. False;323. Que23;In determining whether ? 357(c) applies, assess whether the liabilities;involved exceed the bases of all;assets a shareholder transfers to the corporation.;a.;True;b. False;324. Que24;A taxpayer transfers;assets and liabilities to a corporation in return for its stock. If the;liabilities exceed the basis of the assets transferred, the taxpayer will;recognize gain to avoid having a negative basis in the stock.;a.;True;b. False;325. Que25;If both ?? 357(b) and (c) apply to the same transfer (i.e., the liability is;not supported by a bona fide business purpose and also exceeds the basis of the;properties transferred), ? 357(c) predominates.;a.;True;b. False;326. Que26;When a taxpayer transfers property subject to a mortgage to a controlled;corporation in an exchange qualifying under ? 351, the transferor shareholder?s;basis in stock received in the transferee corporation is increased by the;amount of the mortgage on the property.;a.;True;b. False;327. Que27;In a ? 351 transaction, Gerald transfers equipment worth $85,000 (basis of;$120,000) in exchange for all of the Rust Corporation stock. Gerald?s stock;basis is $120,000 and Rust?s basis in the equipment is $120,000.;a.;True;b. False;328. Que28;Carl and Ben form Eagle Corporation. Carl transfers cash of $50,000 for 50;shares of stock of Eagle. Ben transfers a secret process with a tax basis of;zero and a fair market value of $50,000 for the remaining 50 shares in Eagle.;Carl will have a tax basis of $50,000 in his stock in Eagle Corporation, but;Ben?s basis in his stock will be zero.;a.;True;b. False;329. Que29;Isabella and Marta form Pine Corporation. Isabella transfers land (basis of;$40,000 and fair market value of $180,000) for 50 shares plus $20,000 cash;while Marta transfers $160,000 cash for the other 50 shares in Pine;Corporation. Pine Corporation has a basis of $40,000 in the land it receives;from Isabella.;a.;True;b. False;330. Que30;Carmen and Carlos form White Corporation. Carmen transfers cash of $100,000 for;100 shares in White. Carlos transfers property (basis of $20,000 and fair;market value of $80,000) and agrees to serve as manager of White Corporation;for one year, in return, Carlos receives 100 shares in White. The value of;Carlos?s services is $20,000. White Corporation can deduct $20,000 as;compensation expense for the value of the services Carlos will render.;a.;True;b. False;331. Que31;Kim, a real estate dealer, and others form Eagle Corporation under ? 351. Kim;contributes inventory (land held for resale) in return for Eagle stock. The;holding period for the stock includes the holding period of the inventory.;a.;True;b. False;332. Que32;A corporation?s holding period for property received under ? 351 includes the;holding period of the transferor shareholder.;a.;True;b. False;333. Que33;A shareholder?s holding period for stock received under ? 351 includes the;holding period of the property transferred to the corporation.;a.;True;b. False;334. Que34;When depreciable property is transferred to a controlled corporation under;351, any recapture potential disappears and does not carry over to the;corporation.;a.;True;b. False;335. Que35;In order to encourage the development of an industrial park, a county donates;land to Ecru Corporation. The donation does not result in gross income to Ecru.;a.;True;b. False;336. Que36;Silver Corporation receives $1 million in cash from Madison County as an;inducement to expand its operations. Within one year, Silver spends $1.5;million to enlarge its existing plant. Silver Corporation?s basis in the;expansion is $500,000.;a.;True;b. False;337. Que37;To ease a liquidity problem, all of the shareholders of Osprey Corporation;contribute additional cash to its capital. Osprey has no tax consequences from;the contribution.;a.;True;b. False;338. Que38;Rosa, the sole shareholder of Robin Corporation, contributes land (basis of;$40,000 and fair market value of $100,000) to the corporation but does not;receive additional stock. Neither Rosa nor Robin Corporation will have to;recognize gain as a result of this transfer.;a.;True;b. False;339. Que39;If a corporation is thinly capitalized, all debt is reclassified as equity.;a.;True;b. False;340. Que40;To help avoid the thin capitalization problem, it is advisable to make the;repayment of the debt contingent upon the corporation?s earnings.;a.;True;b. False;341. Que41;A shareholder lends money to his corporation in his capacity as an investor. If;the loans become worthless, a business bad debt results.;a.;True;b. False;342. Que42;Amy owns 20% of the stock of Wren Corporation, which she acquired several years;ago at a cost of $10,000. Amy is Vice-President of Wren and earns a salary of;$80,000 annually. Last year, Wren Corporation was experiencing financial;problems, and Amy loaned the corporation $25,000. In the current year, Wren;becomes bankrupt, and both her stock investment and the loan become worthless.;Amy has a nonbusiness bad debt deduction this year of $25,000.;a.;True;b. False;343. Que43;If a shareholder owns stock received as a gift from her mother, it cannot be;1244 stock.;a.;True;b. False

 

Paper#59214 | Written in 18-Jul-2015

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