CHAPTER 7
CORPORATIONS: REORGANIZATIONS
SOLUTIONS TO PROBLEM MATERIALS
Status: Q/P
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1 LO 1 IRS Letter Ruling Unchanged 1 2 LO 1 Reorganizations follow tax law Unchanged 2 3 LO 1 Types of reorganizations Unchanged 3 4 LO 2 Comparing like-kind exchange to corporate New reorganization 5 LO 2 Four-column template Unchanged 5 6 LO 1, 2, 3 Reorganization: tax attributes Unchanged 6 7 LO 3 “Type A” merger “Type A” consolidation New 8 LO 3 “Type B” reorganization New 9 LO 3 “Type A” and “Type C” reorganizations Unchanged 9 10 LO 3 “Type C” reorganizations New 11 LO 3 “Type D” reorganizations Unchanged 11 12 LO
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26.e. “Type C.”
26.f. Taxable.
27. $200,000 stock redemption capital gain, basis $350,000.
28. $2,000 gain, $24,300 basis.
29. Citron $50,000 gain; Ecru $650,000 basis; Electra no loss recognized, $840,000 basis.
30. “Type E;” James $30,000 gain, $29,412 common basis, $20,588 preferred basis; Karen $10,000 gain.
31.a. Frank $100,000 stock basis, $10,000 bond basis, $7,000 dividend, $3,000 capital gain. Kasha $900,000 stock basis, $90,000 bond basis, $63,000 dividend, $27,000 capital gain.
31.b. Nontaxable to Quail; Covey’s basis $1.2 million.
32.a. Jed $26,000 gain, $90,000 basis; Zia no loss recognized, $337,000 basis.
32.b. Alpha $28,000 gain; Beta and AlphaBeta no gain.
32.c. Diagram consolidation “Type A.”
33.a. Qualifies as “Type C.”
33.b. Acquiring stock transferred $2.3 million.
33.c. Wei $200,000 gain; Target $75,000 gain
33.d. Wei building basis $300,000; stock basis $2.1 million.
34.a. “Type D” split-up.
34.b. “Type A.”
34.c. “Type F.”
34.d. Taxable.
34.e. Taxable.
34.f. “Type C.”
35.a. Qualifies for “Type B,” not “Type C.”
35.b. Diagram “Type B.”
36. Consolidation “Type A” best choice.
37.a. Diagram “Type B.”
37.b. Transaction may have problems qualifying as “Type B.”
38. Not qualify as “Type C” as cash causes problem.
39.a. Not qualify as spin-off “Type D” as investments retained no business.
39.b. Spin-off only manufacturing or wholesale and leave other in Puce.
39.c. Diagram spin-off.
40.a. $2.975 million Tiny stock (85%) transferred to Hefty.
This Comprehensive Problem is to acquaint you with the content of the 2012 financial statements
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (Eds.). (2011). Essentials of corporate finance (7th ed., Rev.). New York, NY: McGraw-Hill Irwin.
Identify two ways in which a shareholder can realize a return on a share investment. Describe the relationship between them.
Ai & Aii – the different types of abuse & Signs and symtoms of the abuse.
1. Country A is extremely efficient in the mining of tin. However, its climate and terrain makes it difficult to produce corn. According to the theory of comparative advantage, Country A should:
I’m glad you asked this question. It’s a simple but important answer. I’m just going to clarify a couple of math rules for you:
3. Equity financing = $8,400,000(0.60) = $5,040,000 2011 Dividends = Net income - Equity financing = $14,400,000 - $5,040,000 = $9,360,000 All of the equity financing is done with retained earnings as long as they are available.
Step 1: Construct a network diagram for the project. (NOTE: EF for activity H should be 19)
Chris and Sue are 50 percent shareholders in BackBone personal service corporation. Backbone provides chiropractic services in four separate offices, in four small towns: Troy, Union, Vista and Willow. Chris is the main chiropractor in the Troy office, and Sue heads up the Vista office. Charlie, the main chiropractor in the Willow office, does not see eye-to-eye with Chris and Sue on management styles. Charlie is highly competent and well-liked by patients and therefore indispensable in the eyes of Chris and Sue. Chris and Sue may be willing to give Charlie control of the Willow office,
Paulson E. (2001). “Inside Cisco: The real story of sustained M&A growth”, John Wiley & Sons, Inc.
We will assume that Number Name where name is not unique (i.e., there may be more than one “John Smith”, each with a different student number). Then the multivalued dependencies are:
When in the midst of a Chapter 13 bankruptcy plan, filing for a divorce will mean revisions that have to be accepted by the bankruptcy trustee. Since many Chapter 13 bankruptcy plans are very strict and leave very little “extra” cash, many feel as if they are left in an impossible situation. One or both of the parties want to leave the marriage, but they’re already in a strict repayment plan. In many cases, the repayment plan is based on parties being required to work full time (some up to 7 days a week) in order to make their agreed upon payments in a timely manner. Parties aren’t sure whether the Chapter 13 trustee will revise the plan in order to compensate for separate living expenses, spousal maintenance costs, etc. It seems as if the new development of an impending divorce could make all past efforts to get out of debt through the Chapter 13 bankruptcy pointless. In this instance, there are two options open to the parties involved in the bankruptcy and seeking divorce: reduce the Chapter 13 plan payment to accommodate two separate households or convert the bankruptcy to a Chapter 7. Today, we’ll discuss the first option more in depth.
1. Bridget Company uses activity-based costing. The company has two products: A and B. The annual
Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%
a. Design the logic for a program that allows a user to enter 10 numbers, then