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Question;530. MC;Five years ago, Eleanor transferred property she had used in her sole;proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a;transaction that qualified under ? 351. The assets had a tax basis to her of;$100,000 and a fair market value of $270,000 on the date of the transfer. In;the current year, Blue Corporation (E & P of $800,000) redeems 250 shares;from Eleanor for $220,000 in a transaction that does not qualify for sale or;exchange treatment. With respect to the redemption, Eleanor will have a;a.;$195,000 capital gain.;b. $220,000 capital gain.;c. $195,000 dividend.;d. $220,000 dividend.;e. None of the above.;531. 46;Five years ago, Eleanor transferred property she had used in her sole;proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a;transaction that qualified under ? 351. The assets had a tax basis to her of;$100,000 and a fair market value of $270,000 on the date of the transfer. In;the current year, Blue Corporation (E & P $800,000) redeems 250 shares;from Eleanor for $220,000 in a transaction that qualifies for sale or exchange;treatment. With respect to the redemption, Eleanor will have a;a.;$195,000 capital gain.;b. $220,000 capital gain.;c. $195,000 dividend.;d. $220,000 dividend.;e. None of the above.;532. 47;Finch Corporation distributes property (basis of $140,000, fair market value of;$200,000) to a shareholder in a distribution that is a qualifying stock;redemption. The property is subject to a liability of $90,000, which the;shareholder assumes. The basis of the property to the shareholder is;a.;$0.;b. $50,000.;c. $110,000.;d. $140,000.;e. None of the above.;533. 48;Ember Corporation has 500 shares of stock outstanding: Zoe owns 170 shares;Leticia owns 95 shares, and Samuel owns 55 shares. Sage Partnership owns the;other 180 shares in Ember Corporation. Zoe, Leticia, and Samuel, all unrelated;are equal partners of the Sage Partnership. In applying the stock attribution;rules under ? 318;a.;Zoe owns, directly and indirectly, 350 shares in Ember Corporation.;b. Samuel owns, directly and indirectly;115 shares in Ember Corporation.;c. Leticia owns, directly and;indirectly, 95 shares in Ember Corporation.;d. Sage Partnership owns, directly and;indirectly, 180 shares in Ember Corporation.;e. None of the above.;534. 49;Kite Corporation has 1,000 shares of stock outstanding. Kent owns 250 shares;Kent?s father owns 150 shares, Kent?s brother owns 250 shares, and Kent?s son;owns 50 shares. Plover Corporation owns the other 300 shares in Kite;Corporation. Kent owns 60% of the stock in Plover Corporation. Applying the;318 stock attribution rules, how many shares does Kent own in Kite Corporation?;a.;250.;b. 400.;c. 450.;d. 630.;e. None of the above.;535. 50;Cardinal Corporation has 1,000 shares of common stock outstanding. John owns;400 of the shares, John?s father owns 300 shares, John?s daughter owns 200;shares, and Redbird Corporation owns 100 shares. John owns 70% of the stock in;Redbird Corporation. How many shares is John deemed to own in Cardinal;Corporation under the attribution rules of ? 318?;a.;400.;b. 600.;c. 700.;d. 1,000.;e. None of the above.;536. 51;Which of the following is an incorrect;statement regarding the application of the ? 318 stock attribution rules?;a.;Stock owned by a partner is deemed to be owned in full by a partnership.;b. Stock owned by a beneficiary is;deemed to be owned in full by an estate.;c. An individual is deemed to own the;shares owned by his or her spouse, children, grandchildren, or parents.;d. Stock owned by a corporation is;deemed to be owned proportionately by any shareholder owning 50% or more of the;corporation?s stock.;e. None of the above.;537. 52;Currently, Brown Corporation (E & P of $800,000) has 1,000 shares of common;stock outstanding. Pat owns 200 shares. His wife owns 400 shares, his daughter;owns 100 shares, and his father owns 300 shares. Two years ago, Pat transferred;$30,000 to Brown Corporation in exchange for 100 newly issued shares of;nonvoting preferred stock. In the current year, Brown Corporation redeems Pat?s;preferred stock for $50,000, its fair market value. With respect to the;distribution in redemption of the preferred stock;a.;Pat has dividend income of $20,000.;b. Pat has dividend income of $50,000.;c. Pat has a long-term capital gain of;$20,000.;d. Pat has a long-term capital gain of;$50,000.;e. None of the above.;538. 53;Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren;Corporation (E & P of $1.2 million) as follows: Hazel, 1,300 shares, Emily;400 shares, and Frank, 300 shares. Wren redeems 300 of Hazel?s shares (basis of;$60,000) for $450,000. With respect to the distribution in redemption of the;stock;a.;Hazel has a capital gain of $390,000.;b. Hazel has dividend income of;$450,000.;c. Hazel has dividend income of;$390,000.;d. Hazel has a capital gain of $450,000.;e. None of the above.;539. 54;Lucinda owns 1,100 shares of Blackbird Corporation stock at a time when;Blackbird has 2,000 shares of stock outstanding. The remaining shareholders are;unrelated to Lucinda. What is the minimum number of shares Blackbird must;redeem from Lucinda so that the transaction will qualify as a disproportionate;redemption?;a.;880.;b. 484.;c. 393.;d. 220.;e. None of the above.;540. 55;Hannah, Greta, and Winston own the stock in Redpoll Corporation (E & P of;$900,000) as follows: Hannah, 600 shares, Greta, 400 shares, and Winston, 1,000;shares. Greta is Hannah?s daughter, and Winston is Hannah?s brother. Redpoll;Corporation redeems 400 of Hannah?s shares (basis of $55,000) for $240,000.;Hannah purchased the stock three years ago as an investment. With respect to;the stock redemption, Hannah has;a.;Dividend income of $185,000.;b. Dividend income of $240,000.;c. Long-term capital gain of $185,000.;d. Long-term capital gain of $240,000.;e. None of the above.;541. 56;Kingbird Corporation (E & P of $800,000) has 1,000 shares of stock;outstanding. That stock is held by Amata (550 shares) and Esteban (450 shares);who are unrelated individuals. Kingbird redeems 200 of Amata?s shares for;$1,000 per share. Amata paid $300 per share for her Kingbird stock nine years;ago. Which of the following statements is correct with respect to the stock;redemption?;a.;Amata has dividend income of $200,000.;b. Amata has a long-term capital gain of;$140,000.;c. Amata?s basis in her remaining 350;shares is $60,000.;d. Kingbird reduces its E & P by;$200,000.;e. None of the above.;542. 57;Julian, Berta, and Maria own 400 shares, 400 shares, and 200 shares;respectively, in Caramel Corporation (E & P of $750,000). Berta is Julian?s;sister, and Maria is Julian?s aunt. Caramel Corporation redeems all of Julian?s;stock for $420,000. Julian paid $200 a share for the stock five years ago.;Julian continued to serve on Caramel?s board of directors after the redemption.;With respect to the redemption;a.;Dividend income of $420,000.;b. Long-term capital gain of $420,000.;c. Dividend income of $340,000.;d. Long-term capital gain of $340,000.;e. None of the above.;543. 58;Lupe and Rodrigo, father and son, each own 50% of the stock outstanding of;Heron Corporation (E & P of $400,000). During the current year, Heron;redeems all of Lupe?s shares for $250,000. The transaction cannot qualify as a;complete termination redemption if;a.;Lupe filed an agreement with his return to notify the IRS of any prohibited;interest acquired in the 10-year postredemption period.;b. Lupe continued to serve on Heron;Corporation?s board of directors for one year following the redemption.;c. Lupe received a $250,000 note;receivable from Heron in the stock redemption.;d. Lupe loaned Heron Corporation $50,000;two years following the redemption.;e. More than one of the above is;correct.;544. 59;Leon owns 400 shares of the 1,000 outstanding shares of Crane Corporation (E;P of $650,000). None of the other shareholders of Crane are related to Leon.;Leon acquired his Crane shares ten years ago for $60,000. Crane has operated;several trades or businesses for more than five years. In the current year;Crane sells the assets of one of those trades or businesses and distributes the;proceeds from the asset sale to the shareholders in a pro rata stock;redemption. In this transaction, Leon;receives $180,000 in redemption of 250 shares of Crane. As a result of this;transaction, Leon will recognize;a.;No gain or loss.;b. $142,500 dividend income.;c. $180,000 dividend income.;d. $142,500 long-term capital gain.;e. None of the above.;545. 60;Which of the following statements is correct with respect to a partial;liquidation?;a.;The genuine contraction of a corporate business requirement is a subjective;test that taxpayers cannot rely upon with certainty.;b. The distribution of proceeds from the;sale of marketable securities (held for investment) to shareholders in exchange;for part of their stock will satisfy the not essentially equivalent to a;dividend test.;c. A stock redemption pursuant to a;partial liquidation cannot be pro rata with respect to the shareholders.;d. The termination of a business test;requires that the distributing corporation actively conducted at least three;trades or businesses for at least five years.;e. None of the above.;546. 61;The gross estate of April, decedent, includes stock in Brown Corporation and;Parrot Corporation valued at $700,000 and $2.3 million, respectively. April?s;adjusted gross estate is $7.5 million. At the time of her death in 2011, April;owned 24% of the Brown stock and 40% of the Parrot stock. Immediate members of;April?s family own the remaining shares of both Brown and Parrot. Those;individuals are also the sole beneficiaries of April?s estate. Death taxes and;funeral and administration expenses for April?s estate are $700,000. April had;a basis of $130,000 in the Brown stock and $290,000 in the Parrot stock. Brown;Corporation (E & P of $900,000) distributed land worth $700,000 (basis of;$650,000) to April?s estate in redemption of all of the Brown stock. Which of;the following is a correct statement regarding the tax consequences of this;redemption?;a.;The estate recognizes no gain (or loss) on the redemption.;b. The estate recognizes $700,000 of;dividend income on the redemption.;c. Brown Corporation recognizes no gain;(or loss) on the distribution of the land.;d. The estate has a basis of $650,000 in;the land.;e. None of the above.;547. 62;The adjusted gross estate of Keith, decedent, is $6 million. Included in the;gross estate is stock in Gold Corporation (E & P of $750,000), a closely;held corporation, valued at $2.4 million as of the date of Keith?s death in;2011. Keith had acquired the stock twelve years ago at a cost of $420,000.;Death taxes and funeral and administration expenses for Keith?s estate are $1.2;million. Gold Corporation redeems one-half of the stock from Keith?s estate in;a ? 303 redemption to pay death taxes using property with a fair market value;of $1.2 million (adjusted basis of $950,000). Which of the following is a;correct statement regarding the tax consequences of this redemption?;a.;The estate will have a basis of $950,000 in the property received from Gold;Corporation in redemption of the estate?s stock.;b. Gold Corporation will recognize gain;of $250,000 on the distribution of the property to Keith?s estate.;c. Gold Corporation will not reduce its;E & P as a result of the distribution of the property to Keith?s estate.;d. The estate will recognize a $990,000;long-term capital gain on the redemption.;e. None of the above.;548. 63;The adjusted gross estate of Debra, decedent, is $8 million. Debra?s estate;will incur death taxes and funeral and administration expenses of $1 million.;Debra?s gross estate includes stock in Silver Corporation that she had;purchased twelve years ago for $600,000 (date of death fair market value of $3;million). At the time of her death in 2011, Debra owned 80% of the stock in;Silver Corporation. Silver Corporation (E & P of $4 million) redeems all of;the estate?s stock in the corporation for $3 million. Debra?s will names her;daughter, Dena, who owns the remaining 20% interest in Silver Corporation, as;her sole heir. With respect to this redemption, Debra?s estate has the;following income;a.;$0.;b. $2.4 million long-term capital gain.;c. $2 million dividend.;d. $1 million dividend.;e. None of the above.;549. 64;Which of the following is a correct statement regarding a redemption to pay;death taxes under ? 303?;a.;An estate recognizes gain on the redemption equal to the excess of the;distribution proceeds over the decedent?s basis in the stock.;b. The value of the stock in the;decedent?s gross estate must exceed 40% of the value of the adjusted gross;estate.;c. A corporation recognizes gains and;losses on the distribution of property in the redemption.;d. The redemption need not satisfy any;of the ? 302 qualifying stock redemption provisions.;e. None of the above.;550. 65;Vulture Corporation distributes land (basis of $250,000, fair market value of;$475,000) to Bonita, a shareholder, to carry out a qualifying stock redemption.;The land is distributed subject to a $300,000 liability. Bonita had a basis of;$25,000 in the shares redeemed. With respect to the redemption;a.;Vulture Corporation will recognize a gain of $50,000.;b. Vulture Corporation will recognize a;gain of $225,000.;c. Bonita will recognize a gain of $450,000.;d. Bonita will have a basis of $175,000;in land.;e. None of the above.;551. 66;Pursuant to a qualifying stock redemption, Redbird Corporation (E & P of;$400,000) transfers land held for investment purposes to Bob, a 10%;shareholder. On the date of the distribution, Redbird has a basis of $200,000;in the land and its fair market value is $150,000. Bob has a basis of $40,000;in the shares redeemed. With respect to the redemption;a.;Bob will recognize a gain of $110,000.;b. Bob will have $150,000 of dividend;income.;c. Bob will have a $200,000 basis in the;land.;d. Redbird Corporation will recognize a;capital loss of $50,000.;e. None of the above.;552. 67;Canary Corporation has 1,000 shares of stock outstanding. It redeems in a;qualifying stock redemption 350 shares for $400,000 at a time when it has;paid-in capital of $100,000 and E & P of $1 million. What would be the charge;to Canary?s E & P as a result of the redemption?;a.;$400,000.;b. $350,000.;c. $140,000.;d. $40,000.;e. None of the above.;553. 68;In the current year, Loon Corporation made a distribution in redemption of some;of its shares. Loon incurred expenditures in connection with the redemption;totaling $35,000 (accounting fees of $9,000, legal fees of $20,000, and;brokerage fees of $6,000). The distribution was a qualifying stock redemption.;How much of the $35,000 is deductible in the current year?;a.;$6,000.;b. $9,000.;c. $29,000.;d. $35,000.;e. None of the above.;554. 69;Which of the following is an incorrect;statement regarding the tax consequences of a ? 306 stock sale?;a.;No loss is recognized on the sale.;b. The shareholder generally recognizes;ordinary income equal to the fair market value of the preferred stock on the;date of the stock dividend.;c. The issuing corporation reduces its E;P by the amount of sales proceeds.;d. Any ordinary income recognized by the;shareholder qualifies for the 15% (or 0%) maximum tax rate that applies to;dividend income.;e. None of the above.;555. 70;Connie sold 200 shares of ? 306 stock (basis of $10,000) in Blackbird;Corporation to Larry (an unrelated individual) for $30,000. When the ? 306;stock was issued to Connie, the stock had a value of $30,000, and Blackbird had;E & P of $500,000. At the time the ? 306 stock is sold, Blackbird?s E;P is $550,000. At the time of the sale, Connie owned 750 shares of common stock;(basis of $65,000) in Blackbird. With respect to the sale of the ? 306 stock by;Connie;a.;Connie has a $30,000 capital gain.;b. Blackbird Corporation reduces its E;P by $30,000.;c. Connie has a $20,000 capital gain.;d. Connie has a $75,000 basis in the;common stock.;e. None of the above.;556. 71;Two years ago, Emily, the sole shareholder of Tan Corporation (E & P of;$600,000), received a nontaxable stock dividend of 100 shares of preferred;stock (fair market value of $100,000) from Tan. As a result of the stock;dividend, Emily properly allocated $30,000 of her common stock basis to the;preferred stock. One year ago, Emily made a gift of the preferred stock in Tan;Corporation to her son, Matt. In the current year, Matt sells one-half of the;shares of preferred stock to Betty, an unrelated party, for $50,000. With;respect to the sale of the preferred stock by Matt;a.;Matt will recognize ordinary income of $0.;b. Matt will recognize ordinary income;of $35,000.;c. Matt will recognize ordinary income;of $50,000.;d. Matt will recognize a capital gain of;$35,000.;e. None of the above.;557. 72;Joe owns 100% of Green Corporation (E & P of $500,000) and 100% of Navy;Corporation (E & P of $400,000). Joe sells 100 shares in Green (basis of;$40,000) to Navy for $70,000, its fair market value. Joe purchased the stock in;Green six years ago. Joe has;a.;Dividend income of $30,000.;b. Dividend income of $70,000.;c. A long-term capital gain of $30,000.;d. A long-term capital gain of $70,000.;e. None of the above.;558. 73;In comparing a qualifying stock redemption with a complete liquidation, which;of the following statements is incorrect?;a.;Liquidations and qualifying stock redemptions parallel each other in terms of;the effect that E & P has on the nature of the gain or loss recognized by;the shareholder.;b. The basis of property acquired is its;fair market value on the date of distribution for both a qualifying stock;redemption and a liquidation.;c. Both a qualifying stock redemption;and a complete liquidation produce sale or exchange treatment to the;shareholder.;d. A corporation will recognize gain;upon the distribution of appreciated property for both a qualifying stock redemption;and a complete liquidation, but a corporation will recognize loss upon a;distribution of depreciated property only for a qualifying stock redemption.;e. Section 267 disallows recognition of;losses between related parties in a qualifying stock redemption but not in a;complete liquidation.;559. 74;Pursuant to a complete liquidation, Woodpecker Corporation distributes the;following assets to its unrelated shareholders: land held for six years as an;investment (basis of $100,000, fair market value of $300,000), inventory (basis;of $100,000, fair market value of $140,000), and marketable securities held for;two years as an investment (basis of $200,000, fair market value of $120,000).;What are the tax results to Woodpecker Corporation as a result of the;liquidation?;a.;Woodpecker Corporation would recognize ordinary income of $40,000 and a net;capital gain of $200,000.;b. Woodpecker Corporation would;recognize ordinary income of $40,000 and a net capital gain of $120,000.;c. Woodpecker Corporation would;recognize ordinary income of $40,000 and a net capital loss of $80,000.;d. Woodpecker Corporation would;recognize no gain or loss on the liquidation.;e. None of the above.;560. 75;Pursuant to a complete liquidation, Oriole Corporation distributes to its;shareholders land with a basis of $450,000 and a fair market value of $550,000.;The land is subject to a liability of $600,000. What is Oriole?s recognized;gain or loss on the distribution?;a.;$0.;b. $100,000 gain.;c. $150,000 gain.;d. $50,000 loss.;e. None of the above.;561. 76;The stock in Tangerine Corporation is held by two unrelated individuals, Janet;(60%) and Joaquin (40%). One year before the liquidation of Tangerine, the;shareholders transfer properties to the corporation in a transaction that;qualifies under ? 351. Included in that transfer was land (basis of $600,000;fair market value of $650,000). Pursuant to its liquidation in the current;year, Tangerine Corporation distributes the land (now worth $500,000) pro rata;to the shareholders. What amount of loss will Tangerine recognize on the;distribution?;a.;$0.;b. $40,000.;c. $60,000.;d. $100,000.;e. None of the above.;562. 77;The stock in Black Corporation is owned entirely by Nancy (80%) and Wanda;(20%), mother and daughter. Three years ago, Nancy contributed land (basis of;$200,000, fair market value of $250,000) to Black Corporation in a transaction;that qualified under ? 351. In the current year and pursuant to a complete;liquidation of Black, the land is distributed proportionately to Nancy and;Wanda. At the time of the liquidating distribution, the land had a fair market;value of $100,000. What amount of loss will Black Corporation recognize on the;distribution of the land?;a.;$20,000.;b. $80,000.;c. $100,000.;d. $150,000.;e. None of the above.;563. 78;Magenta Corporation acquired land in a ? 351 exchange one year ago. The land;had a basis of $320,000 and a fair market value of $350,000 on the date of the;transfer. Magenta Corporation has two shareholders, Mark (70%) and Megan (30%);who are brother and sister. Magenta Corporation adopts a plan of liquidation in;the current year. On this date, the land has decreased in value to $250,000.;Magenta Corporation sells the land for $250,000 and distributes the proceeds;pro rata to Mark and Megan. What amount of loss may Magenta Corporation;recognize on the sale of the land?;a.;$0.;b. $21,000.;c. $30,000.;d. $100,000.;e. None of the above.;564. 79;Purple Corporation has two equal shareholders, Joshua and Ellie, who are father;and daughter. One year ago, the two shareholders transferred properties to;Purple in a ? 351 exchange. Joshua transferred land (basis of $400,000, fair;market value of $350,000) and securities (basis of $20,000, fair market value;of $80,000), while Ellie transferred equipment (basis of $220,000, fair market;value of $430,000). In the current year, Purple Corporation adopts a plan of;liquidation, sells all of its assets, and distributes the proceeds pro rata to;Joshua and Ellie. The only loss realized upon disposition of the properties was;with respect to the undeveloped land that had decreased in value to $290,000;and was sold for this amount. Purple never used the land for any business;purpose during the time it was owned by the corporation. What amount of loss;can Purple Corporation recognize on the sale of the land?;a.;$0.;b. $50,000.;c. $60,000.;d. $110,000.;e. None of the above.;565. 80;On April 7, 2010, Crow Corporation acquired land in a transaction that;qualified under ? 351. The land had a basis of $480,000 to the contributing;shareholder and a fair market value of $350,000. Assume that the shareholder;also transferred equipment (basis of $50,000, fair market value of $200,000) in;the same ? 351 exchange. Crow Corporation adopted a plan of liquidation on;October 6, 2011. On December 8, 2011, Crow Corporation distributes the land to;Ali, a shareholder who owns 20% of the stock in Crow Corporation. The land?s;fair market value was $300,000 on the date of the distribution to Ali. Crow;Corporation acquired the land to use as security for a loan it had hoped to;obtain from a local bank. In negotiating with the bank for a loan, the bank;required the additional capital investment as a condition of its making a loan;to Crow Corporation. How much loss can Crow Corporation recognize on the;distribution of the land?;a.;$0.;b. $50,000.;c. $180,000.;d. $230,000.;e. None of the above.;566. 81;During the current year, Ecru Corporation is liquidated and distributes its;only asset, land, to Kena, the sole shareholder. On the date of distribution;the land has a basis of $300,000, a fair market value of $650,000, and is;subject to a liability of $400,000. Kena, who takes the land subject to the;liability, has a basis of $75,000 in the Ecru stock. With respect to the;distribution of the land, which of the following statements is correct?;a.;Ecru Corporation recognizes a gain of $100,000.;b. Kena has a basis of $250,000 in the;land.;c. Kena recognizes a gain of $175,000.;d. Kena has a basis of $300,000 in the;land.;e. Kena recognizes a gain of $575,000.;567. 82;In the current year, Dove Corporation (E & P of $1 million) distributes all;of its property in a complete liquidation. Alexandra, a shareholder, receives;land having a fair market value of $200,000. Dove Corporation had purchased the;land as an investment three years ago for $150,000, and the land was;distributed subject to a $100,000 liability. Alexandra took the land subject to;the $100,000 liability. What is Alexandra?s basis in the land?;a.;$50,000.;b. $100,000.;c. $150,000.;d. $200,000.;e. None of the above.;568. 83;After a plan of complete liquidation has been adopted, Condor Corporation sells;its only asset, land (basis of $220,000), to Eduardo (an unrelated party) for;$300,000. Under the terms of the sale, Condor Corporation receives cash of;$50,000 and Eduardo?s notes for the balance of $250,000. The notes are payable;over the next five years ($50,000 per year) and carry an appropriate interest;rate. Immediately after the sale, Condor Corporation distributes the cash and;notes to Maria, the sole shareholder of Condor Corporation. Maria has a basis;of $30,000 in the Condor stock. The installment notes have a value equal to;their face amount. If Maria wishes to defer as much gain as possible on the;transaction, which of the following is correct?;a.;Maria recognizes a gain of $20,000 in the year of liquidation.;b. Maria recognizes a gain of $45,000 in;the year of liquidation.;c. Maria recognizes a gain of $270,000;in the year of liquidation.;d. Condor Corporation recognizes no gain;or loss on the distribution of the installment notes.;e. None of the above.;569. 84;Indigo has a basis of $1 million in the stock of Owl Corporation, a subsidiary;in which it owns 100% of all classes of stock. Indigo purchased the stock in;Owl 10 years ago. In the current year, Indigo liquidates Owl and acquires;assets worth $1.2 million. At the time of its liquidation, Owl Corporation had;a basis of $800,000 in the assets and E & P of $500,000. Which of the;following statements is correct with respect to the liquidation?;a.;Owl recognizes a gain of $400,000.;b. Indigo has a $1 million basis in the;assets.;c. Owl?s E & P of $500,000 is;eliminated.;d. Indigo recognizes a gain of $200,000.;e. None of the above.;570. 85;The stock of Cardinal Corporation is held as follows: 90% by Blue Jay;Corporation (basis of $500,000) and 10% by Samuel (basis of $70,000). Cardinal;Corporation is liquidated on October 20, 2011, pursuant to a plan adopted on;January 7, 2011. Pursuant to the liquidation, Cardinal Corporation distributed;Asset A (basis of $450,000, fair market value of $720,000) to Blue Jay, and;Asset B (basis of $45,000, fair market value of $80,000) to Samuel. No election;is made under ? 338. With respect to the liquidation of Cardinal;a.;Cardinal Corporation recognizes a gain of $35,000.;b. Blue Jay has a basis in Asset A of;$720,000.;c. Samuel recognizes no gain (or loss).;d. Blue Jay recognizes a gain of;$220,000.;e. None of the above.;571. 86;Penguin Corporation purchased bonds (basis of $95,000) of its 100% owned;subsidiary, Finch Corporation, at a discount. Pursuant to a ? 332 liquidation;and in satisfaction of the indebtedness, Finch distributes land worth $100,000;(basis of $110,000) to Penguin. Which of the following statements is correct;with respect to the distribution of land?;a.;Neither Finch nor Penguin recognize gain (or loss).;b. Finch recognizes a loss of $10,000;and Penguin recognizes no gain.;c. Finch recognizes no loss and Penguin;recognizes a gain of $5,000.;d. Finch recognizes a loss of $10,000;and Penguin recognizes a gain of $5,000.;e. None of the above.;572. 87;The stock of Brown Corporation (E & P of $680,000) is owned as follows: 80%;by Orange Corporation (basis of $620,000), and 20% by Susanna (basis of;$155,000). Both shareholders purchased their shares in Brown five years ago. In;the current year, Brown Corporation liquidates and distributes land (fair;market value of $800,000, basis of $970,000) to Orange Corporation, and;securities (fair market value of $200,000, basis of $160,000) to Susanna. Which;of the following statements is incorrect;with respect to the tax consequences resulting from these distributions?;a.;Susanna recognizes a $45,000 gain and has a $200,000 basis in the securities.;b. Brown recognizes no loss on the;distribution of the land.;c. Orange recognizes no gain and has a;$970,000 basis in the land.;d. Brown recognizes no gain on the;distribution of the securities.;e. None of the above.;573. 88;Three years ago, Loon Corporation purchased 100% of the stock of Pelican;Corporation for $950,000. Currently, Pelican Corporation has assets with a;basis of $1.1 million and a fair market value of $1.3 million. If Loon;liquidates Pelican, what basis will Loon have in the assets it acquires from;Pelican Corporation?;a.;$0.;b. $950,000.;c. $1.1 million.;d. $1.3 million.;e. None of the above.;574. 89;During the current year, Goldfinch Corporation purchased 100% of the stock of;Dove Corporation and made a qualified election under ? 338. Which of the;following statements is incorrect;with respect to the ? 338 election?;a.;Goldfinch is treated as having bought all of Dove?s assets on the qualified;stock purchase date.;b. If Dove is liquidated, Goldfinch will;have a basis in the assets received equal to Dove?s basis in the assets.;c. Dove is treated as a new corporation;as of the day following the qualified stock purchase date.;d. Dove can recognize gain or loss as a;result of the ? 338 election.;e. None of the above.;575. 90;Which of the following statements is correct;with respect to the ? 338 election?;a.;The subsidiary corporation makes the ? 338 election.;b. A qualified stock purchase occurs;when a corporation acquires, in a taxable transaction, at least 80% of the;stock (voting power and value) of another corporation within a 18-month period.;c. The subsidiary corporation must be;liquidated pursuant to the ? 338 election.;d. For purposes of the qualified stock;purchase requirement, subsidiary corporation stock acquired by any member of an;affiliated group that includes the parent corporation is considered acquired by;the parent.;e. None of the above.

 

Paper#59222 | Written in 18-Jul-2015

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