Buckwold12e_ch14_Review - 1CHAPTER 14 MULTIPLE CORPORATIONS...

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1CHAPTER 14 MULTIPLE CORPORATIONS AND THEIR REORGANIZATION Review Questions 1. “A corporate reorganization usually involves a change in form, rather than a change in substance.” Explain this statement. 2. What unique tax treatment does a corporate reorganization provide? What is the logic for permitting this to occur? 3. Is it possible for unrelated corporations to combine their business activities through a reorganization? If it is, what must occur in order to ensure that the transaction will not be treated as an outright sale of property at fair market value? 4. Identify four basic reorganization techniques. 5. Briefly describe two alternative tax treatments when the business assets of one corporation are transferred to another corporation. Are these two alternatives available only if the corporation acquiring the assets is owned by the corporation selling the assets? Explain. 6. If Corporation A wishes to transfer its business operations to Corporation B by way of an asset transfer, must all of the assets relating to that business be transferred? Explain. How will the future income of each corporation be different if some but not all of the business assets are transferred? 7. Describe what takes place when two or more corporations amalgamate. 8. Distinguish between a wind-up of a wholly owned subsidiary corporation and an amalgamation of the parent and subsidiary. 9. What is the tax treatment of a corporation’s unused net capital losses and/ or non-capital losses after that corporation has been amalgamated with another corporation or has been wound up into its parent corporation? 10. What form of reorganization permits the current common shareholders to retain their existing value in the corporation and, at the same time, alters the ratio relating to the sharing of future growth beyond the existing value? Explain how this reorganization can be accomplished without any immediate tax consequences to the shareholders.
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11. What is a holding corporation? 12. Dividends received by a corporation from another taxable Canadian corporation are excluded from taxable income and therefore are not usually subject to tax. However, in certain circumstances, a Canadian- controlled private corporation may be subject to a special refundable tax on the receipt of Canadian dividends. In what circumstances will this special tax apply, what is the rate of tax, and why is it referred to as a “refundable tax”? 13. What is the primary benefit of using a holding corporation to hold investments in the shares of other corporations, rather than holding those investments personally? 14. Briefly explain why a holding company may be useful when the shares of an active business corporation are being acquired. 15.
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Buckwold12e_ch14_Review - 1CHAPTER 14 MULTIPLE CORPORATIONS...

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