Law question data bank

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 _________________________.

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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.