chapter_7_solutions - 7-1 Chapter 7 Solutions Corporations:...

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7-1 Chapter 7 Solutions Corporations: Reorganizations (2011 edition) updated: August 13, 2010 26. a. Acquisitive “Type D” reorganization. White, the larger corporation, transfers its assets to Red, the target, in exchange for a controlling interest in Red. White liquidates. p. 7-16 b. “Type C” reorganization. Does not qualify as a “Type A” reorganization because Blue does not assume all of Green’s liabilities. Liabilities are not boot because none are assumed by Green. pp. 7-9 to 7-15 c. Taxable transaction. Does not qualify as a “Type A” or “Type C” reorganization because Orange does not distribute the land or liquidate. pp. 7-9 to 7-15 d. “Type F” reorganization. p. 7-21 e. Taxable transaction. Does not qualify as a “Type B” reorganization because Black uses nonvoting stock. pp. 7-10 to 7-13 f. “Type D” split-off reorganization. Stock in Gray relinquished to receive Silver stock. pp. 7- 17 to 7-20 g. “Type A” reorganization. Does not qualify as a “Type C” reorganization because substantially all of the assets are not acquired by Brown. pp. 7-9, 7-10, 7-13, and 7-15 h. Taxable transaction. Does not qualify as a “Type A” reorganization because all of the liabilities are not assumed. Does not qualify as a “Type C” reorganization because 80% of the assets are not acquired with voting stock. The liabilities are treated as boot due to the cash in the transaction. pp. 7-9 to 7-15 i. “Type G” reorganization. p. 7-22 j. Taxable transaction. Not an acquisitive “Type D” reorganization because Coral (acquiring) does not transfer substantially all of its assets. p. 7-16 k. “Type B” reorganization. As long as Fuchsia owns at least 80% after the restructuring, it is a "Type B." pp. 7-10 to 7-13 l. “Type D” split-up reorganization. Chartreuse divides into two corporations and then liquidates. pp. 7-17 to 7-20
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7-2 28. The reorganization meets the § 368 requirements for the “Type A” consolidation, and therefore it receives nontaxable exchange treatment. Neither Tri nor Angle Corporation recognizes gain or loss because each distributes all of the Triangle stock and cash received in the transaction to their shareholders. Gain, loss, and basis determination for Tyron and Anna can be determined using the four-column formula presented in Concept Summary 7.1. Recognized Postponed Basis in Realized Gain/Loss Gain/Loss Gain/Loss Assets/Stock Tyron $400,000 $50,000 cash received $150,000 $350,000 250,000 50,000 100,000 $150,000 $100,000 $250,000 Anna $200,000 $ –0– ($50,000) $170,000 250,000 + 50,000 ($ 50,000) $220,000 Tyron recognizes a $50,000 gain due to the cash he received. He has a carryover basis of $250,000 in his Triangle stock. Anna may not recognize the loss on her stock. Her basis in the Triangle stock is $220,000 ($250,000 basis – $30,000 cash received) (or computed as shown above).
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chapter_7_solutions - 7-1 Chapter 7 Solutions Corporations:...

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