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Question;679. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question MA #1-10 Match the following items with the;statements below. Terms may be used more than once.Carries over to new;corporations in a split-up reorganization.A 50 percentage-point change in;ownership that occurs because of tax-free reorganization.Tax avoidance is not;enough, transaction must have a corporate economic consequence.Requires the;computation of a deduction equivalent when determining its limitation.Rate used;to determine the ? 382 limitation.When the transactions are so interdependent;that the accomplishment of one would be fruitless without the completion of the;series.Shareholders recognize gain to the extent the restructuring qualifies as;a redemption.Any asset other than stock or securities received by the target;shareholders.Requires at least a 40% carryover ownership by target;shareholders.Can be treated as boot if cash as well as voting stock is the;consideration used by the acquiring corporation in a ?Type C?;reorganization.Earnings and profits Equity structure shift Sound business;purpose Business credits Federal long-term tax-exempt rate Step transaction;Capital gain Boot Continuity of interest Liability assumption Continuity of;business enterprise Dividend Discount rate Ordinary gain Owner shift Ownership;change Section 382 limitation;[a] 1. Carries over to new;corporations in a split-up reorganization.;[b] 2. A 50 percentage-point;change in ownership that occurs because of tax-free reorganization.;[c] 3. Tax avoidance is not;enough, transaction must have a corporate economic consequence.;[d] 4. Requires the;computation of a deduction equivalent when determining its limitation.;[e] 5. Rate used to determine;the ? 382 limitation.;[f] 6. When the transactions;are so interdependent that the accomplishment of one would be fruitless without;the completion of the series.;[g] 7. Shareholders recognize;gain to the extent the restructuring qualifies as a redemption.;[h] 8. Any asset other than;stock or securities received by the target shareholders.;[i] 9. Requires at least a 40%;carryover ownership by target shareholders.;[j] 10. Can be treated as boot;if cash as well as voting stock is the consideration used by the acquiring;corporation in a ?Type C? reorganization.;680. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question MA #11-20 What type of reorganization is affected;in each of the following independent transactions?Red and Blue Corporations;are merged under state law into a new corporation, White Corporation. The White;voting common (70% of value) and nonvoting preferred stocks (30% of value) are;distributed to the Red and Blue shareholders in exchange for all of their;voting common and nonvoting preferred stock. Red and Blue then liquidate.In;exchange for all of Yellow Corporation?s voting common and nonvoting preferred;stock, Green Corporation transfers 40% of its voting common and nonvoting;preferred stock to Yellow. The Green stock is distributed to the Yellow;shareholders and then Yellow liquidates. Yellow becomes a subsidiary of;Green.Apple Corporation transfers voting stock to Banana Corporation in;exchange for substantially all of its assets (value $600,000), $15,000 cash;and assumes $100,000 of Banana?s liabilities. Banana distributes the Apple;stock and cash to its shareholders in exchange for their Banana stock. Banana;then liquidates.Purple Corporation wants to combine with Pink Corporation.;Purple transfers substantially all of its assets to Pink for 82% of Pink?s;voting shares. Purple distributes the Pink stock and its remaining assets to;its shareholders in exchange for their Purple stock. Purple then liquidates.;Purple?s shareholders are in control of Pink Corporation.Black Corporation has;been engaged in manufacturing toys for 8 years and tools for 3 years. Black;creates Brown Corporation and transfers the toy division to it in exchange for;all of Brown?s common voting stock. Black then distributes the Brown stock to;its shareholders.Bark and Wood Corporations are created by Tree Corporation.;Tree transfers its calculator business to Bark in exchange for all of Bark?s;stock. Tree distributes the Bark stock to its shareholders in exchange for 60%;of their Tree stock. Next, Tree transfers its slide ruler division to Wood for;all of its stock. Tree distributes the Wood stock to its shareholders in;exchange for their remaining Tree stock. Tree then liquidates. Tree had;operated both lines of business for 35 years.Flower Corporation has been in;existence for 20 years and has always been owned by Iris and Lilly. They each;also own $50,000 of Flower?s bonds. All of Lilly?s bonds are called in and;exchanged for $50,000 of preferred stock. Iris does not participation in the;transaction.Feather currently has four divisions that have been in existence;for 15 years. Feather creates three new corporations and transfers one division;to each newly formed corporations in exchange for all of the stock of these new;corporations. Feather retains one division. Feather then distributes the stock;in the three new corporations to its shareholders in exchange for 75% of their;stock in Feather.Snow Corporation desires to change to an S Corporation. On;March 1 of the current year, it files all necessary forms with the IRS. The change;becomes retroactive to January 1 of the current year.Loser Corporation is;considering filing bankruptcy under Chapter 11. Loser transfers all of its;assets to NewStart Corporation in exchange for NewStart?s stock and $400,000 in;cash. Loser uses the cash to pay off most of its liabilities and then;distributes the balance to NewStart shareholders and any remaining debtors.;After the transaction, Loser liquidates.?A? reorganization, consolidation;Taxable transaction ?C? reorganization Acquisitive ?D? reorganization Taxable;transaction ?D? reorganization, split-up ?E? reorganization ?D? reorganization;split-off ?F? reorganization Taxable transaction ?A? reorganization, merger ?B?;reorganization ?D? reorganization, spin-off ?G? reorganization;[a] 1. Red and Blue Corporations are;merged under state law into a new corporation, White Corporation. The White;voting common (70% of value) and nonvoting preferred stocks (30% of value) are;distributed to the Red and Blue shareholders in exchange for all of their voting;common and nonvoting preferred stock. Red and Blue then liquidate.;[b] 2. In exchange for all of;Yellow Corporation?s voting common and nonvoting preferred stock, Green;Corporation transfers 40% of its voting common and nonvoting preferred stock to;Yellow. The Green stock is distributed to the Yellow shareholders and then;Yellow liquidates. Yellow becomes a subsidiary of Green.;[c] 3. Apple Corporation;transfers voting stock to Banana Corporation in exchange for substantially all;of its assets (value $600,000), $15,000 cash, and assumes $100,000 of Banana?s;liabilities. Banana distributes the Apple stock and cash to its shareholders in;exchange for their Banana stock. Banana then liquidates.;[d] 4. Purple Corporation;wants to combine with Pink Corporation. Purple transfers substantially all of;its assets to Pink for 82% of Pink?s voting shares. Purple distributes the Pink;stock and its remaining assets to its shareholders in exchange for their Purple;stock. Purple then liquidates. Purple?s shareholders are in control of Pink;Corporation.;[e] 5. Black Corporation has;been engaged in manufacturing toys for 8 years and tools for 3 years. Black;creates Brown Corporation and transfers the toy division to it in exchange for;all of Brown?s common voting stock. Black then distributes the Brown stock to;its shareholders.;[f] 6. Bark and Wood;Corporations are created by Tree Corporation. Tree transfers its calculator;business to Bark in exchange for all of Bark?s stock. Tree distributes the Bark;stock to its shareholders in exchange for 60% of their Tree stock. Next, Tree;transfers its slide ruler division to Wood for all of its stock. Tree;distributes the Wood stock to its shareholders in exchange for their remaining;Tree stock. Tree then liquidates. Tree had operated both lines of business for;35 years.;[g] 7. Flower Corporation has;been in existence for 20 years and has always been owned by Iris and Lilly.;They each also own $50,000 of Flower?s bonds. All of Lilly?s bonds are called;in and exchanged for $50,000 of preferred stock. Iris does not participation in;the transaction.;[h] 8. Feather currently has;four divisions that have been in existence for 15 years. Feather creates three;new corporations and transfers one division to each newly formed corporations;in exchange for all of the stock of these new corporations. Feather retains one;division. Feather then distributes the stock in the three new corporations to;its shareholders in exchange for 75% of their stock in Feather.;[i] 9. Snow Corporation desires;to change to an S Corporation. On March 1 of the current year, it files all;necessary forms with the IRS. The change becomes retroactive to January 1 of;the current year.;[j] 10. Loser Corporation is;considering filing bankruptcy under Chapter 11. Loser transfers all of its;assets to NewStart Corporation in exchange for NewStart?s stock and $400,000 in;cash. Loser uses the cash to pay off most of its liabilities and then;distributes the balance to NewStart shareholders and any remaining debtors.;After the transaction, Loser liquidates.;681. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #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.;682. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #2;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.;683. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #3;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.;684. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #4;If stockholders of the corporations involved in a tax-free reorganization;receive ____________________ in addition to stock, they may recognize gain. The;character of the gain is either ____________________ or ____________________.;685. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #5;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.;686. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #6;Since the ____________________ reorganization precludes the use of boot, gain;is not recognized in this type of reorganization. In this reorganization, a;relationship between the acquiring and target corporations;is created.;687. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #7;The ?Type C? reorganization requires that at least ____________________ percent;of the value of the target?s assets be acquired with;stock.;688. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #8;The acquisitive ?Type D? reorganization differs from other restructurings in;that the entity that transfers its assets is the;corporation rather than the ____________________ corporation.;689. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #9;In a ____________________ divisive reorganization the original distributing;corporation disappears. 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 ____________________ stock in the;original is exchanged for stock in the new corporation.;690. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #10;A ____________________ reorganization is a recapitalization of a single;corporation.;691. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #11;The ?Type F? is the mere change in;or _________________________.;692. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #12;In a ____________________ reorganization the creditors rather than the;shareholders are considered when testing the continuity of;doctrine.;693. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #13;The acquiring corporation in a ?Type G? reorganization must reduce the tax;attributes carried over to it to the extent of the ____________________ relief.;694. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #14;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. However, these are sales by the target shareholders to;the acquiring corporation.;695. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #15;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.;696. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #16;Liabilities are problematic only in the ____________________ reorganization;when the ____________________ corporation transfers other property as well as;stock to the target.;697. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #17;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.;698. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #18;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.;699. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #19;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.;700. CHAPTER;7?CORPORATIONS: REORGANIZATIONS Question CO #20;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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