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Chapter 7 Reorganizations

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CHAPTER 7

CORPORATIONS: REORGANIZATIONS

SOLUTIONS TO PROBLEM MATERIALS

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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 …show more content…

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.

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