Ball Corporation owns 80% of Net Corporations stock and

20.
Ball Corporation owns 80% of Net Corporation’s stock and Jack owns the remaining 20% of Net Corporation’s stock. Ball’s basis in the Net stock is $200,000 and Jack’s basis in the Net stock is $100,000. Under a plan of complete liquidation, Ball Corporation receives property with an adjusted basis of $400,000 and a FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and a FMV of $200,000. Ball and Jack’s recognized gains on the liquidation are:

Ball Jack
A) $0 $0
B) $0 $100,000
C) $200,000 $50,000
D) $600,000 $100,000

21.
Parent Corporation owns all of Subsidiary Corporation’s stock. In addition, Parent Corporation owns $100,000 (face amount and basis) of Subsidiary Corporation’s bonds. When Subsidiary Corporation is completely liquidated, it distributes property with a $70,000 adjusted basis and a $100,000 FMV to Parent Corporation in redemption of the Subsidiary Corporation bonds. Following the liquidation, Parent Corporation will have a basis in the Subsidiary Corporation property received for the bonds of
A) $-0-.
B) $70,000.
C) $100,000.
D) none of the above

22.
Broom Corporation transfers assets with an adjusted basis of $300,000 and a FMV of $400,000 to Docker Corporation in exchange for $400,000 of Docker Corporation stock as part of a tax-free reorganization. The docker stock had been purchased from its shareholders one year earlier for $350,000. How much gain do Broom and Docker Corporations recognize on the asset transfer?

Broom Docker
A) $0 $0
B) $0 $50,000
C) $100,000 $0
D) $100,000 $50,000

23.
Identify which of the following statements is false.
A) The acquiring corporation does not recognize gains or losses under Sec. 1001 when it transfers non-cash boot property to the target corporation or its shareholders.
B) Gain recognized by a shareholder in a tax-free reorganization may be characterized as a dividend.
C) If no gain or loss is recognized by a stock or security holder in a tax-free reorganization, the stock or securities received take a substituted basis equal to the basis of the shares or securities surrendered.
D) Tax-free reorganizations generally do not involve actual redemptions of the stock of the target corporation’s shareholders.

24.
Identify which of the following statements is true.
A) In a tax-free reorganization, the acquiring corporation’s holding period for the acquired properties includes the period of time the target corporation held the properties.
B) In a tax-free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation.
C) The receipt of cash by a shareholder results in the recognition of all of his or her realized gain even if the transaction qualifies as a tax-free reorganization.
D) All are false.

25.

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