Ch 7 Part 2

Question 0

Taxable acquisition vs. nontaxable reorganization: target corporation’s amount of gain or loss (2 things taxable, 3 things non)

Answer 0

Taxable: all gains or losses recognized, installment method
Available if payments deferred

Non: generally no gain/loss recognized, gain recognized when
Target corp. receives boot or does not distribute boot property
To its shareholders

Gain also recognized on distribution of appreciated boot or
Retained earnings

Question 1

Taxable acquisition vs. nontaxable reorganization: consideration used in acquisition

Answer 1

Taxable: primarily cash and debt instruments, may involve
Some stock of acquiring corp.

Non: primarily voting stock and limited amount of cash/debt

Question 2

Taxable acquisition vs. nontaxable reorganization: target corporation -depreciation recapture

Answer 2

Taxable: Sec. 1245 and 1250 depreciation recaptured

Non: sec. 1245 and 1250 depreciation not recaptured unless
Boot triggers recognition of gain

Question 3

Taxable acquisition vs. nontaxable reorganization: acquiring corporation- gain or loss when stock is exchanged for property

Answer 3

Taxable: none recognized

Non: none recognized

Question 4

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - gain or loss when boot is exchanged for property

Answer 4

Same for Taxable and non: gain or loss recognized if noncash
boot property is Transferred to target corporation

Question 5

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - basis of acquired assets

Answer 5

Taxable: cost

Non: same as target corporation’s basis increased by gain
recognized

Question 6

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - holding period of acquired assets

Answer 6

Taxable: begins day after transaction date

Non: includes holding period of target corp

Question 7

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - acquisition of target corporation tax attributes

Answer 7

Taxable: no

Nontaxable: yes

Question 8

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - amount of gain or loss

Answer 8

Taxable: realized gain or loss is recognized, installment method
Available if payments are deferred

Non: realized gain is recognized to extent of boot received,
Realized losses are not recognized

Question 9

Taxable acquisition vs. nontaxable reorganization: target corporation - character of gain or loss

Answer 9

Both taxable and non: depends on nature of each asset

distributed

Question 10

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - character of gain or loss

Answer 10

Taxable- capital gain or loss, maybe sec. 1244 loss

Non: capital gain, or dividend if boot is received

Question 11

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - basis of stock and securities received

Answer 11

Taxable: cost, generally FMV of stock or other securities received

Non: substituted basis referenced to the stock and securities
Surrendered, FMV for boot property

Question 12

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - holding period of stock and securities received

Answer 12

Taxable: begins day after transaction date

Non: includes holding period for stock and securities surrendered,
Day after transaction date for boot property

Question 13

Taxable acquisition vs. nontaxable reorganization: target corporation - parent subsidiary relationship established

Answer 13

Yes for both taxable and nontaxable

Question 14

Taxable acquisition vs. nontaxable reorganization: target corporation - consolidated return election available

Answer 14

Yes for both taxable and nontaxable

Question 15

Taxable acquisition vs. nontaxable reorganization: target corporation - basis in assets

Answer 15

Taxable: unchanged by stock acquisition unless sec. 338 election
Is made

Non: unchanged by stock acquisition, no sec. 338 election
Available

Question 16

Taxable acquisition vs. nontaxable reorganization: target corporation - tax attributes

Answer 16

Retained by target corporation for both taxable and nontaxable

Question 17

In a reorganization, because the target corporation recognizes no gain on asset transfer, the carryover basis is…

Answer 17

Not stepped up

Question 18

Section 354: shareholders in reorganization 1 thing

Section 356? 2 things

Answer 18

Shareholders recognize no gain or loss if they receive acquires
Stock in exchange for target corps stock in reorganization

Sec. 356 has shareholders recognize gain to extent that they
Receive boot and no qualifying property that doesn’t represent
Continuation of equity interest

Shareholder recognize gain to extent of lesser of realized gain
Or amount of cash received + FMV of noncash property received

Question 19

Under section 354, when is the receipt of securities taxable?

Answer 19

When principal amount of securities (other than stock) received
Exceeds principal amount of securities surrendered

FMV of excess constitutes boot, ex. Debt securities

Question 20

Sec. 358: basis of stock and securities (nonrecognition property) received by target corporation shareholders and security holders

Answer 20

Basis of nonrecognition property received =
Adjusted basis of stock and securities surrendered
+ any gain recognized in exchange
- cash received in exchange
- FMV of noncash property received in exchange

Question 21

Type A reorganizations encompass which four transactional structures?

Answer 21

1 mergers
2 consolidations
3 triangular mergers
4 reverse triangular mergers

Question 22

Type A reorganization - merger or consolidation: the target corporation property acquired

Answer 22

Assets and liabilities of target corporation

Question 23

Type A reorganization - merger or consolidation: consideration that can be used

Answer 23

Voting and non voting stock, securities and property of acquiring
Corporation

Question 24

Type A reorganization - merger or consolidation: what happens to target corporation

Answer 24

Target corporation liquidates as part of merger

Question 25

Type A reorganization - merger or consolidation: shareholders' recognized gain

Answer 25

Lesser of realized gain or FMV of boot received

Question 26

Requirements for Type A reorganization: it's purpose

Answer 26

Transaction must have business purpose and meet continuity of interest and business enterprise requirements

Question 27

Type B reorganization - stock for stock: target corporation property acquired

Answer 27

At least 80% of voting and non voting target corporation stock

Question 28

Type B reorganization - stock for stock: consideration that can be used

Answer 28

Voting stock of acquiring corporation

Question 29

Type B reorganization - stock for stock: what happens to target corporation

Answer 29

Becomes subsidiary of acquiring corporation

Question 30

Type B reorganization - stock for stock: shareholders' recognized gain

Answer 30

None

Question 31

Requirements for type B reorganization: boot paid by transferor

Answer 31

Boot paid by transferor might render entire transaction taxable

Question 32

Type C reorganization - assets for stock: target corporation property acquired

Answer 32

Substantially all target corp. assets and possibly some or all Of its liabilities

Question 33

Type C reorganization - assets for stock: consideration that can be used

Answer 33

Acquiring corporation stock, securities and other property, Provided at least 80% of assets are acquired for voting stock

Question 34

Type C reorganization - assets for stock: what happens to the target corporation .

Answer 34

Target corporation liquidates

Question 35

Target corporation liquidation

Answer 35

Acquiring Stock, securities and boot received in reorganization and all Of target corp's remaining properties must be distributed to Shareholders and creditors Target corporation receives all its target stock and securities From its shareholders

Question 36

Type C reorganization - assets for stock: shareholder's recognized gain

Answer 36

Lesser of realized gain or FMV of boot property

Question 37

Type C reorganization - assets for stock: for advanced ruling purposes what does, "substantially all" mean

Answer 37

70% of gross assets and 90% of net assets of T corporation

Question 38

Type D reorganization - acquisitive: target corporation property acquired

Answer 38

Substantially all target corps assets and possibly some or all of It's liabilities

Question 39

Type D reorganization - acquisitive: consideration that can be used

Answer 39

Acquiring corporation stock, securities and other property

Question 40

Type D reorganization - acquisitive: what happens to target corporation

Answer 40

Target corporation liquidates

Question 41

Type D reorganization - acquisitive: shareholders' recognized gain

Answer 41

Lesser of realized gain or FMV of boot received

Question 42

Type D reorganization - acquisitive: 3 requirements to be considered type D

Answer 42

1 "substantially all" is same as in type C 2 continuity if interest requirement applies 3 control is defined as 50% voting power or 50% value of Acquiring corporation stock

Question 43

How is a type A reorganization unique in comparison to other statutory reorganizations?

Answer 43

Corporation law is an important factor in determining whether Transaction qualifies as a nontaxable merger

Question 44

Type A reorganization

Answer 44

Merger or consolidation that satisfies the corporation laws of The US, a state, the District of Columbia or a foreign country

Question 45

Type A merger, most common type

Answer 45

Involves acquiring corp. transferring its stock, securities and Boot to target corporation in exchange for its assets and Liabilities

Question 46

Another form of Type A merger

Answer 46

Acquiring corporation exchanges it's stock, securities and Other consideration directly for target corp stock and securities Held directly by target corp. shareholders and creditors

Question 47

Type A consolidation, 2 types (similar to merger)

Answer 47

A New corporation uses stock, securities and other consideration To acquire assets of 2 or more existing target corporations Other type: new acquiring corp transfers it's stock, securities, And boot directly to target corp shareholders and creditors In exchange for their stock and securities

Question 48

Section 368 makes a Type A reorganization...

Answer 48

The must flexible reorganization by placing no restrictions on Kind of consideration that can be used

Question 49

Type A reorganization merger: what are its 2 steps?

Answer 49

1 acquiring stock and possibly other securities transferred to T corp in exchange for T corp's assets and liabilities 2 Acquiring stock and any securities and consideration received Is transferred to T corp shareholders in exchange for their T stock Securities

Question 50

What is the post reorganization structure of a type A merger?

Answer 50

Acquiring and Target's former shareholders/creditors own A corp. stock, which owns Assets and liabilities of A and T corps