FTax IRGTB ch19 p001-018

D e 0 251 500 400 not able to be determined from the

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Unformatted text preview: a true statement about 351 transfers? a. b. c. d. e. A transferor can receive items other than stock and still qualify for tax-free treatment. The amount of boot received as a result of the assumption of liabilities by the corporation is limited to the excess of liabilities over basis of assets transferred. The transferor never recognizes ordinary income if he receives only common stock. The amount of gain recognized is the greater of the realized gain or the boot received. All the statements are false. 50. In a 351 transfer, stock includes all of the following except a. b. c. d. Common and preferred Voting and nonvoting Participating and nonparticipating Stock rights and warrants 51. Which one of the following is considered in calculating the basis of stock received in a 351 transfer? Assume only voting common stock is received. a. b. c. d. e. Basis of the property transferred to the corporation by the shareholder Fair market value of the stock received by the shareholder Fair market value of the property received by the corporation Shareholder liabilities assumed by the corporation All are considered 52. B transfers land with a basis of $40,000 and a fair market value of $180,000 to a new corporation for all of its common stock. The corporation assumes B's mortgage on the land of $90,000. Assuming no tax avoidance motives, the amount of gain that B must recognize is a. b. c. d. e. $0, because basis of land and stock is $40,000 $50,000, because mortgage exceeds basis of land by this amount $90,000, because the relief of the mortgage is considered boot $140,000, because the fair market value of the stock exceeds basis of the land by this amount $230,000, the realized gain on the transaction 53. During the year, the city of Houston contributed land worth $100,000 to ABC Inc. in order to lure the company to establish a factory in the city. ABC will report a. b. c. d. $100,000 income and have a basis in the property of $100,000 No income and have a basis in the property of $100,000 No income and have a zero basis in the property $100,000 income and have a zero basis in the property 19 Corporations: Formation and Operation Solutions to Test Bank True or False 1. True. A trust will be taxed as a corporation if it is not formed simply to protect or conserve the property of the beneficiaries (i.e., there is a profit motive) and has associates. (See pp. 19-2 and 19-3 Reg. 301.7701-4.) 2. False. It is the Internal Revenue Code which will be applied in determining the status of an entity for tax purposes. (See pp. 19-3 and 19-4 and Reg. 301.7701-2.) 3. True. A corporation is not allowed the personal exemptions and deductions that are available to individuals, and all allowable deductions are subtracted from gross income in arriving at taxable income. (See pp. 19-4 and 19-5.) 4. False. A corporation may elect a period of not less than 180 months over which organizational costs can be amortized. Also, organizational costs are generally clearly defined with no choice of "reclassifying" them as expenses....
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This note was uploaded on 02/05/2012 for the course ACCT 112 taught by Professor Smith during the Spring '11 term at Adrian College.

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