Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash.

Drexel
Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV. The assets are subject to $200,000 in
liabilities. Drexel Corporation shareholders purchased their stock eight years ago for $300,000. Axle Corporation's
basis in the Drexel Corporation stock is
Question 1 options:
$800,000.
$600,000.
$500,000.
$300,000.
Identify which of the following statements is true.
Question 2 options:
Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an
increased basis for the target corporation's assets on its books.
Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax-free
liquidation of the target corporation permits a step-up in the basis of the target corporation's assets to
their FMV.
Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation, the basis
of the assets of the target corporation reflects the purchase price of the target stock
All of the above are false.
Identify which of the following statements is false.
Question 3 options:
A Sec. 338 election usually triggers taxation to the target corporation.
A Sec. 338 election must be made not later than the fifteenth day of the ninth month following the first
stock acquisition in a series of acquisitions that leads to 80% or more stock ownership.
When a Sec. 338 election is made, the target corporation is treated as having sold all of its assets at their
FMV at the close of the acquisition date.
In a Sec. 338 deemed sale election, the shareholders of the target corporation sell their stock to the
acquiring corporation.
Jersey Corporation purchased 50% of Target Corporation's single class of stock on June 1 of this year. They
purchased an additional 40% on November 20 of this year. The Sec. 338 election must be made on or before
Question 4 options:
June 30 of this year.
November 30 of this year.
August 15 of next year.
June 30 of next year.
Broom Corporation transfers assets with an adjusted basis of $300,000 and an 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?
Question 5 options:
Broom
$0

Docker
$0

Broom
$0

Docker
$50,000

Broom
$100,000

Docker
$0

Broom
$100,000

Docker
$50,000

Paper Corporation adopts a plan of reorganization and exchanges 1,000 shares of its voting stock and $50,000 in
cash for Chase Corporation's assets having a $200,000 adjusted basis and a $275,000 FMV. Chase Corporation is
subsequently liquidated. What is Paper Corporation's basis in the assets acquired in the exchange?
Question 6 options:
$200,000

$250,000
$275,000
$50,000
Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation
stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy
receives 50 shares of Clipper stock worth $150,000 and $150,000 cash. The remaining 100 shares of Binder stock
were owned by Bruce who received the same consideration for his Binder stock. Binder and Clipper have E&P
balances of $250,000 and $500,000, respectively. Buddy and Bruce each own 25% of Clipper Corporation's 200
shares of stock after the reorganization. Which of the following is correct?
Question 7 options:
Buddy recognizes $200,000 as dividend income.
Buddy recognizes $200,000 as a capital gain.
Buddy recognizes $150,000 as dividend income.
Buddy recognizes $150,000 as a capital gain.
Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting
preferred stock and $200,000 (face amount and FMV) of securities. The assets have an adjusted basis of $600,000
and an FMV of $1,500,000. In addition, Acme Corporation assumes $500,000 of Fisher's liabilities. At the time of the
transfer, Acme's E&P is $400,000. Fisher distributes the stock and securities to its sole shareholder Barbara for all of
her Fisher stock. After the reorganization, Barbara owns 25% of Acme's stock. Barbara has an adjusted basis of
$400,000 in her Fisher stock. Barbara must recognize a gain of
Question 8 options:
$0.
$200,000 dividend income.
$200,000 capital gain.
$650,000 capital gain.
Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting
preferred stock and $200,000 (face amount and FMV) of securities. The assets have an adjusted basis of $600,000
and an FMV of $1,500,000. In addition, Acme Corporation assumes $500,000 of Fisher's liabilities. At the time of the
transfer, Acme's E&P is $400,000. Fisher distributes the stock and securities to its sole shareholder Barbara for all of
her Fisher stock. After the reorganization, Barbara owns 25% of Acme's stock. Barbara has an adjusted basis of
$400,000 in her Fisher stock. Barbara's basis for her Acme securities is
Question 9 options:
0.
$200,000.
$350,000.
$400,000.
American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting
stock plus $50,000 of cash. Utech Corporation assets are worth $750,000. Utech Corporation does not distribute the
stock and cash but instead holds the stock as an investment. Utech will use the American cash along with the cash
it retained to start a new business. The transaction can be classified as a
Question 10 options:
Type A reorganization.
Type B reorganization.
Type C reorganization.
The transaction does not qualify as a tax-free reorganization.
Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock. Stone Corporation
distributes the Rock stock to its shareholders pursuant to its liquidation. After the acquisition, Stone Corporation's
shareholders own 20% of the Rock stock (by voting power and value). The transaction is classified as a

Question 11 options:
Type B reorganization.
Type C reorganization.
Type D reorganization.
The transaction does not qualify as a tax-free reorganization.
In which of the following reorganizations does the distributing corporation transfer all of its assets to two controlled
corporations before the distributing corporation dissolves?
Question 12 options:
split-of
spin-of
split-up
Type C reorganization
Identify which of the following statements is true.
Question 13 options:
A tax-free spin-of coming under Sec. 355 occurs when a parent corporation distributes stock in a
controlled subsidiary corporation in exchange for some of its own stock.
Tax-free split-ofs and spin-ofs coming under Sec. 355 require the surrender of shareholder stock.
When boot is received in a Sec. 355 spin-of transaction, the FMV of the boot will be a dividend to the
extent of the shareholder's ratable share of the distributing corporation's E&P.
All of the above are false.
The acquiring corporation does not obtain the target corporation's tax attributes in
Question 14 options:
a Type A reorganization.
a Type B reorganization.
an acquisitive Type C reorganization.
an acquisitive Type D reorganization.
Acquiring Corporation is 100%-owned by Peter Hart. Target Corporation is 100% owned by Dick Weber. The two
individuals are not related. Target Corporation has $400,000 of NOL carryovers at the time Acquiring Corporation is
considering making a cash acquisition of part or all of Target Corporation's stock. What is the maximum amount of
Target stock that can be acquired in a single transaction without the Sec. 382 loss limitation rules applying to the
NOLs?
Question 15 options:
49%
50%
80%
Any acquisition of Target stock will cause the Sec. 382 loss limitation to apply.