Question

<pclass=”msobodytext” style=”box-sizing: border-box; margin-top: 3.2pt; text-indent: -16.5pt;”>1. Which of the following statements is true concerning all types of tax-free corporate reorganizations?

1. Assets are transferred from one corporation to another.
2. Stock is exchanged with shareholders.
3. Liabilities that are assumed when cash is also used as consideration will be treated as boot.
4. Corporations and shareholders involved in the reorganization will recognize gains but not losses.
5. None of the above statements is true.
6. A shareholder bought 10,000 shares of Coral Corporation for $50,000 several years ago. When the stock is valued at

$90,000, Coral redeems the shares in exchange for 5,000 shares of Blush Corporation stock and a $10,000 Blush bond. This transaction meets the requirements of § 368. Which of the following statements is falsewith regard to this transaction?

1. The shareholder has a realized gain of $40,000.
2. The shareholder has a postponed gain of $30,000.
3. The shareholder has a basis in the Blush stock of $60,000.
4. The shareholder has a recognized gain of $10,000.
5. All of the above statements are true.
6. Bobcat Corporation redeems all of Zed’s 4,000 shares and distributes to him 2,000 shares of Van Corporation stock plus $50,000 cash. Zed’s basis in his 20% interest in Bobcat is $100,000 and the stock’s value is $250,000. At the time Bobcat is acquired by Van, the accumulated earnings and profits of Bobcat are $200,000 and of Van are $75,000. How does Zed treat this transaction for tax purposes?
7. No gain is recognized by Zed in this reorganization.
8. Zed reports a $50,000 recognized dividend.
9. Zed reports a $50,000 recognized capital gain.
10. Zed reports a $40,000 recognized dividend and a $10,000 capital gain.
11. Not enough information is available to determine proper treatment.

4. Yoko purchased 10% of Toyger Corporation’s stock six years ago for $70,000. In a transaction qualifying as a “Type C” reorganization, Yoko received $50,000 cash and 8% of Angora Corporation’s stock (valued at $100,000) in exchange for her Toyger stock. Prior to the reorganization, Toyger had $200,000 accumulated earnings and profits and Angora had $300,000. How does Yoko treat the exchange for tax purposes?
5. As a recognized $50,000 long-term capital gain.
6. As a $50,000 dividend.
7. As a $20,000 dividend and a $30,000 capital gain.
8. As a $30,000 dividend and a $20,000 capital gain.
9. None of the above.
10. Korat Corporation and Snow Corporation enter into an acquisitive “Type D” reorganization. Xin currently holds a 20­ year, $10,000 Snow bond paying 4% interest. There are 8 years until the bond matures. In exchange for his Snow bond, Xin receives an 8 year $16,000 Korat bond paying 2.5% interest. Xin thinks this is fair because he will still receive $400 of interest each year and both bonds mature on the same date. How does Xin treat this transaction on his tax return?
11. Xin recognizes no gain or loss on the exchange of bonds.
12. Xin recognizes $750 gain each year for the next 8 years.
13. Xin recognizes $6,000 capital gain.
14. Xin recognizes $6,000 ordinary gain.
15. None of the above.

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