7. Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?
a. Wanda has a realized loss of $200,000. Her Jupiter stock basis is $800,000.b. Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.c. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.d. Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.ANSWER: aRATIONALE: Wanda has a realized loss of $200,000; however, losses are not recognized in reorganizations. Her basis in her Jupiter stock will be $800,000 ($600,000 value of stock received + $200,000 postponedloss OR $900,000 – $100,000 cash received).8. Stacey, Inc., has taxable income of $10 million in 2017. What is the maximum DPAD tax savings for this C corporation?9. Lemon, Inc. has the following items related to the AMT:Alternative minimum tax base$10,275,500Regular corporate tax1,112,500Foreign AMT tax credit187,020Cost of goods sold2,260,020The corporation’s AMT, if any, is:Tentative minimum tax before AMT foreign tax credit$2,055,100Less: AMT foreign tax credit(187,020)Tentative minimum tax$1,868,080Less: Regular tax(1,112,500)AMT$ 755,58010. Coffee Corporation has 2,000 shares of common stock outstanding. John owns 700 of the shares, John’s grandfather owns 100 shares, John’s father owns 100 shares, John’s ex-wife owns 700 shares, and Redbird Partnership owns 400 shares. John is a 50% partner in Redbird Partnership. How many shares is John deemed to own in Coffee Corporation under the § 318 attribution rules?
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- Spring '11
- Taxation in the United States, alternative minimum tax