43) Ball Corporation owns 80% of Net Corporation’s stock and Jack owns the remaining 20% of Net Corp

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43) Ball Corporation owns 80% of Net
Corporation’s stock and Jack owns the remaining 20% of Net Corporation’s stock.
Ball’s basis in the Net stock is $200,000 and Jack’s basis in the Net stock is
$100,000. Under a plan of complete liquidation, Ball Corporation receives
property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack
receives property with an adjusted basis of $50,000 and an FMV of $200,000. Ball
and Jack’s bases in the property received are:
A)

Ball

Jack

$800,000

$200,000

B)

Ball

Jack

$400,000

$200,000

C)

Ball

Jack

$400,000

$ 50,000

D)

Ball

Jack

$200,000

$100,000

44) Market Corporation owns 100% of
Subsidiary Corporation’s stock. Market Corporation completely liquidates
Subsidiary Corporation, receiving land with a $400,000 adjusted basis and a
$500,000 FMV in exchange for Subsidiary stock, which has a $300,000 adjusted
basis. Market Corporation has a basis in the land of
A) $300,000.
B) $400,000.
C) $500,000.
D) none of the above

45) Dusty Corporation owns 90% of Palace
Corporation’s stock and Susan owns the remaining stock. Dusty Corporation’s
stock basis is $300,000 and Susan’s stock basis is $20,000. Under a plan of complete
liquidation, Dusty Corporation receives property with a $400,000 adjusted basis
and a $540,000 FMV and Susan receives property with a $20,000 adjusted basis
and a $60,000 FMV. The bases of the properties are:
A)

Dusty

Susan

$300,000

$20,000

B)

Dusty

Susan

$400,000

$20,000

C)

Dusty

Susan

$400,000

$60,000

D)

Dusty

Susan

$540,000

$60,000

46) Identify which of the following
statements is false.
A) Minority shareholders involved in a
Sec. 332 subsidiary liquidation must recognize a gain or loss under the Sec.
331 general liquidation rules.
B) The parent corporation takes a basis in
property received when liquidating a subsidiary corporation in a Sec. 332
liquidation equal to its basis to the subsidiary corporation.
C) Section 332 is applicable to both the
parent corporation and the minority shareholders if they exist.
D) Property received by a minority
shareholder takes a basis equal to its fair market value.

47) Identify which of the following
statements is false.
A) Liquidating distributions made to
minority shareholders in the tax-free liquidation of a controlled subsidiary
corporation are treated by the liquidating corporation in the same way as
nonliquidating distributions.
B) Sec. 337(a) provides that the
liquidating corporation recognizes no gain or loss on the distribution of
property to the 80% distributee in a complete Sec. 332 liquidation.
C) The depreciation recapture provisions
in Secs. 1245 and 1250 override the Sec. 337(a) nonrecognition rule if a
controlled subsidiary corporation is liquidated into its parent corporation.
D) A corporation that distributes the
stock of a subsidiary may elect to treat the distribution as a sale of the
subsidiary’s assets.

48) Lake City Corporation owns all the
stock in Columbia Corporation. Pursuant to a plan of complete liquidation,
Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake
City. Columbia’s gain with respect to the distribution will be
A) no gain recognized.
B) $200,000.
C) $300,000.
D) $500,000.

49) Lake City Corporation owns all of the
stock in Columbia Corporation. Pursuant to a plan of complete liquidation,
Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake
City. Lake City’s basis in the land will be
A) cannot be determined from the facts
presented
B) 0.
C) $200,000.
D) $500,000.

50) The general rule for tax attributes of
liquidating corporations is
A) they disappear when the liquidation is
complete.
B) they carry over for five years.
C) they disappear only for controlled
subsidiary corporations.
D) they carry over for an indefinite
period of time.

51) Sandy, a cash method of accounting
taxpayer, has a basis of $46,000 in her 500 shares of Newt Corporation stock.
She receives the following distributions as part of Newt’s plan of liquidation.

March 31, 2007

$10,000

July 15, 2007

10,000

November 15, 2007

10,000

January 15, 2008

10,000

The amount of the final distribution is
not known on December 31, 2007. What are the tax consequences of the
distributions?
A) Sandy will recognize a loss of $4,500
in 2007 and a $1,500 loss in 2008.
B) Sandy will recognize the entire loss in
2007.
C) Sandy will recognize the entire loss in
2008.
D) None of the above is correct.

52) Prime Corporation liquidates its
85%-owned subsidiary Bass Corporation under the provisions of Secs. 332 and
337. Bass Corporation distributes land to its minority shareholder, John, who
owns a 15% interest. The property received by John has a $55,000 FMV. The land
was used in the Bass Corporation’s business and has a $65,000 adjusted basis
and is subject to a $10,000 liability, which is assumed by John. John’s basis
in his stock is $25,000. What gain or loss will John and Bass Corporation
recognize on the distribution of the land?
A)

John

Bass

$20,000 gain

$-0-

B)

John

Bass

$20,000 gain

$10,000 loss

C)

John

Bass

$30,000 gain

$-0-

D)

John

Bass

$30,000 gain

$10,000 loss

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