CHAPTER18QUIZ - Corporations: Organization and Capital...

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Corporations: Organization and Capital Structure 18-1 CHAPTER 18 CORPORATIONS: ORGANIZATION AND CAPITAL STRUCTURE EXAMINATION QUESTIONS ____1. In a § 351 transfer, a shareholder receives boot of $15,000 but ends up with a realized loss of $6,000. Only $6,000 of the boot will be taxed to the shareholder. ____2. When a taxpayer transfers property subject to a mortgage to a controlled corporation in an exchange qualifying under § 351, the transferor shareholder’s basis in stock received in the transferee corporation is increased by the amount of the mortgage on the property. ____3. Basis of property transferred minus boot received (including liabilities transferred) plus gain recognized equals basis of stock received in a § 351 transfer. ____4. In return for legal services rendered incident to its formation, Sienna Corporation issues stock to Penelope, an attorney. Sienna cannot deduct the value of this stock as a business expense. ____5. When depreciable property is transferred to a controlled corporation under § 351, any depreciation recapture carries over to the corporation. 6. Gloria owns 100% of the stock of Mango Corporation. In the current year Gloria transfers an installment obligation, tax basis of $30,000 and fair market value of $70,000, for additional stock in Mango worth $70,000. a. Gloria recognizes no taxable gain on the transfer. b. Gloria has a taxable gain of $40,000. c. Gloria has a taxable gain of $70,000. d. Gloria has a basis of $70,000 in the additional stock she received in Mango Corporation. e. None of the above. 7. Jerrod and Katrina form Slate Corporation. Jerrod transfers property (basis of $140,000 and fair market value of $100,000) while Katrina transfers land (basis of $50,000 and fair market value of $80,000) and $20,000 of cash. Each receives 50% of Slate’s stock. As a result of these transfers: a. Jerrod has a recognized loss of $40,000, and Katrina has a recognized gain of $30,000. b. Neither Jerrod nor Katrina has any recognized gain or loss. c. Jerrod has no recognized loss, but Katrina has a recognized gain of $30,000.
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18-2 2007 Comprehensive Edition d. Slate Corporation will have a basis in the land of $80,000. e. None of the above. 8. Christy transfers land worth $300,000, basis of $150,000, to a newly formed corporation, Olive Corporation, for all of Olive’s stock, worth $250,000, and a 10-year note. The note was executed by Olive and made payable to Christy in the amount of $50,000. As a
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CHAPTER18QUIZ - Corporations: Organization and Capital...

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