Vol 2 Add'l Test Bank Ch04

Vol 2 Add'l Test Bank Ch04 - Corporations: Organization and...

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Corporations: Organization and Capital Structure 4-1 CHAPTER 4 CORPORATIONS: ORGANIZATION AND CAPITAL STRUCTURE EXAMINATION QUESTIONS 1. Michael and Freddy form Willow Corporation. Michael transfers property (basis of $175,000 and fair market value of $100,000) while Freddy transfers land (basis of $50,000 and fair market value of $90,000) and $10,000 in cash. Each receives 50% of Willow Corporation’s stock, which is worth a total of $200,000. As a result of these transfers: a. Michael has a recognized loss of $75,000, and Freddy has a recognized gain of $40,000. b. Neither Michael nor Freddy has any recognized gain or loss. c. Michael has no recognized loss, but Freddy has a recognized gain of $40,000. d. Willow Corporation will have a basis in the land of $90,000. e. None of the above. 2. Diana transfers property worth $275,000, basis of $100,000, to Sycamore Corporation for 80% of the stock in Sycamore, worth $150,000, and a long-term note, executed by Sycamore Corporation and made payable to Diana, worth $125,000. a. Diana recognizes no gain on the transfer. b. Diana recognizes a gain of $125,000 on the transfer. c. Diana recognizes a gain of $150,000 on the transfer. d. Diana recognizes a gain of $175,000 on the transfer. e. None of the above. 3. Tony transferred land worth $200,000, with a tax basis of $40,000, to Maple Corporation, an existing entity, for 240 shares of its stock. Maple Corporation has two other shareholders, Michael and Silar, each of whom holds 80 shares. With respect to the transfer: a. Tony has no recognized gain. b. Maple Corporation has a basis of $200,000 in the land. c. Tony has a basis of $200,000 in her 240 shares in Maple Corporation. d. Both b. and c. e. None of the above. 4. Doreen incorporates her sole proprietorship, transferring it to newly formed Thistle Corporation. The assets transferred have an adjusted basis of $300,000 and a fair market value of $330,000. Also transferred was $30,000 in liabilities, $2,000 of which was
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4-2 2010 Corporation Edition personal and the balance of $28,000 being business related. In return for these transfers, Doreen receives all of the stock in Thistle Corporation. a. Thistle Corporation has a basis of $270,000 in the property. b.
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This note was uploaded on 07/27/2010 for the course ACC 1303 taught by Professor Smith during the Summer '10 term at HCCS.

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Vol 2 Add'l Test Bank Ch04 - Corporations: Organization and...

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