Question 21. [LO 3] What is the Congressional purpose for allowing tax deferral o

21. [LO 3] What is the Congressional purpose for allowing tax deferral on transactions that meet the definition of a corporate reorganization?

22. [LO 3] Why do publicly-traded corporations use a triangular form of Type A reorganization in acquiring other corporations?

23. [LO 3] What are the key differences in the tax law requirements that apply to forward versus reverse triangular mergers?

24. [LO 3] What are the key differences in the tax law requirements that apply to a Type A stock-for-assets acquisition versus a Type B stock-for-stock acquisition?

25. [LO 4] How does the form of a regular §338 election compare and contrast to a §338(h)(10) election?

26. [LO 4] What tax benefits does the buyer hope to obtain by making a §338 or §338(h)(10) election?

27. [LO 4] In a stock acquisition, why is there a difference between the tax basis of assets held by an acquired corporation and the tax basis of the shares held by a corporate acquirer? Why is this difference important?

28. [LO 4] What is the presumption behind the continuity of ownership interest (COI) requirement in a tax-deferred acquisition? How do the target shareholders determine if COI is met in a Type A reorganization?

29. [LO 4] W Corporation will acquire all of the assets and liabilities of Z Corporation in a Type A merger, after which W Corporation will sell off all of its assets and liabilities and focus solely on Z Corporation’s business. Explain whether the transaction will be taxable because W Corporation fails the continuity of business enterprise test.

30. [LO 4] Compare how a shareholder computes her tax basis in stock received from the acquiring corporation in a straight Type A merger versus a Type B merger.

31. [LO 5] Explain whether all shareholders receive the same tax treatment in a complete liquidation of a corporation.

32. [LO 5] Explain whether a corporate shareholder recognizes gains and losses on the receipt of distributions of property from the complete liquidation of a subsidiary corporation.

33. [LO 5] Under what circumstances does a corporate shareholder receive tax deferral in a complete liquidation?

34. [LO 5] Under what circumstances will a liquidating corporation be allowed to recognize loss in a non-pro rata distribution?

35. [LO 5] Compare and contrast the built-in loss duplication rule as it relates to §351 with the built-in loss disallowance rule as it applies to a complete liquidation.

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Problems

36. [LO 2] Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market value and adjusted basis.

FMV Adjusted Basis

Inventory $ 10,000 $ 4,000

Building 50,000 30,000

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