ch20 - 1. Legal dissolution under state law is not required...

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1. Legal dissolution under state law is not required for a liquidation to be complete for tax purposes. *a. True b. False 2. One difference between the tax treatment accorded nonliquidating and liquidating distributions is with respect to the recognition of losses by the distributing corporation. As a general rule, a corporation recognizes losses on liquidating distributions of depreciated property (fair market value less than basis) but not on nonliquidating distributions of such property. *a. True b. False 3. As a general rule, a liquidating corporation recognizes gains and losses on the distribution of property in complete liquidation. *a. True b. False 4. The related-party loss limitation does not apply to a distribution of property in complete liquidation that was appreciated (fair market value greater than basis) when it was transferred to the corporation. a. True *b. False 5. The built-in loss limitation in a complete liquidation does not apply to losses attributable to a decline in a property’s fair market value after its transfer to the corporation. *a. True b. False 6. The related-party loss limitation in a complete liquidation can apply to a distribution or sale of property while the built-in loss limitation applies only to distributions of property. a. True *b. False 7. When a shareholder receives property subject to a liability pursuant to a complete liquidation (not a parent-subsidiary liquidation), the fair market value of the property is reduced by the amount of the liability in computing the shareholder’s gain (or loss) on the liquidation.
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*a. True b. False 8. Shareholders may defer gain, to the point of collection, on a liquidating distribution of installment notes obtained by the corporation in the sale of its assets. *a. True b. False 9. Section 332 does not apply to a parent-subsidiary liquidation if the subsidiary corporation is insolvent on the date of the liquidation. *a. True b. False 10. If a liquidation qualifies under § 332, any minority shareholder will recognize gain (but not loss) equal to the difference between the fair market value of assets received and the basis of the shareholder’s stock. a. True *b. False 11. A subsidiary corporation is liquidated at a time when it is indebted to its parent corporation. The subsidiary corporation distributes property to the parent corporation in satisfaction of the indebtedness. If the liquidation is governed by § 332, neither the subsidiary nor the parent recognize gain or loss on the transfer of property in satisfaction of indebtedness. a. True *b. False 12. Brown Corporation purchased 85% of the stock of Green Corporation five years ago for $850,000. In the current year, Brown Corporation liquidates Green Corporation and acquires assets with a basis to Green Corporation of $700,000 (fair market value of $1.1 million). Brown Corporation will have a basis in the assets of $700,000, the same as Green’s basis in the assets. *a. True
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This note was uploaded on 04/02/2012 for the course ECON 101 taught by Professor Sing during the Spring '12 term at CUNY Hunter.

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ch20 - 1. Legal dissolution under state law is not required...

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