Question 1

A corporation's holding period for property received under § 351 includes the holding period of the transferor shareholder.

Accepted Answer

A) True 
 B)False

Question 2

Leah transfers equipment (basis of $400,000 and fair market value of $500,000)  for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is § 1245 depreciation recapture potential of $70,000. As a result of the transfer:

Accepted Answer

A)   Leah recognizes ordinary income of $70,000.
B)   The § 1245 depreciation recapture potential carries over to Crow Corporation.
C)   The § 1245 depreciation recapture potential disappears.
D)   Leah recognizes ordinary income of $70,000 and § 1231 gain of $30,000.
E)   None of the above.F) A) and D)
G) A) and E)

Question 3

A shareholder contributes land to his wholly owned corporation but receives no stock in return. The corporation has a zero basis in the land.

Accepted Answer

A) True 
 B)False

Question 4

Amy owns 20% of the stock of Wren Corporation, which she acquired several years ago at a cost of $10,000. Amy is Vice-President of Wren and earns a salary of $80,000 annually. Last year, Wren Corporation was experiencing financial problems, and Amy loaned the corporation $25,000. In the current year, Wren becomes bankrupt, and both her stock investment and the loan become worthless. Amy has a nonbusiness bad debt deduction this year of $25,000.

Accepted Answer

A) True 
 B)False

Question 5

If a corporation is thinly capitalized, all debt is reclassified as equity.

Accepted Answer

A) True 
 B)False

Question 6

Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.

Accepted Answer

A) True 
 B)False

Question 7

For transfers falling under § 351, what are the holding period rules for stock received by the shareholder and for the assets transferred to the corporation?

Accepted Answer

In a § 351 transaction, the shareholder'...

Question 8

Donghai transferred the following assets to Starling Corporation. 
In exchange, Donghai received 50% of Starling Corporation's only class of stock outstanding. The stock has no established value. However, all parties believe that the value of the stock Donghai received is the equivalent of the value of the assets she transferred. The only other shareholder, Rick, formed Starling Corporation five years ago.

Accepted Answer

A)   Donghai has no gain or loss on the transfer.
B)   Starling Corporation has a basis of $48,000 in the machinery and $108,000 in the land.
C)   Starling Corporation has a basis of $36,000 in the machinery and $144,000 in the land.
D)   Donghai has a basis of $276,000 in the stock of Starling Corporation.
E)   None of the above.F) C) and D)
G) A) and C)

Question 9

A transferor who receives stock for both property and services may not be included in the control group in determining whether an exchange meets the requirements of § 351.

Accepted Answer

A) True 
 B)False

Exam 18: Corporations: Organization and Capital Structure

A shareholder contributes land to his wholly owned corporation but receives no stock in return. The corporation has a zero basis in the land.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.

Correct Answer
verified

A transferor who receives stock for both property and services may not be included in the control group in determining whether an exchange meets the requirements of § 351.

Correct Answer
verified

If a corporation is thinly capitalized, all debt is reclassified as equity.

Correct Answer
verified

For transfers falling under § 351, what are the holding period rules for stock received by the shareholder and for the assets transferred to the corporation?

Correct Answer
verified
In a § 351 transaction, the shareholder'...
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A corporation's holding period for property received under § 351 includes the holding period of the transferor shareholder.

Correct Answer
verified

Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is § 1245 depreciation recapture potential of $70,000. As a result of the transfer:

Correct Answer
verified

Exam 18: Corporations: Organization and Capital Structure

A shareholder contributes land to his wholly owned corporation but receives no stock in return. The corporation has a zero basis in the land.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.

Correct AnswerverifiedShow Answer

A transferor who receives stock for both property and services may not be included in the control group in determining whether an exchange meets the requirements of § 351.

Correct AnswerverifiedShow Answer

If a corporation is thinly capitalized, all debt is reclassified as equity.

Correct AnswerverifiedShow Answer

For transfers falling under § 351, what are the holding period rules for stock received by the shareholder and for the assets transferred to the corporation?

Correct AnswerverifiedIn a § 351 transaction, the shareholder'...View AnswerShow Answer

A corporation's holding period for property received under § 351 includes the holding period of the transferor shareholder.

Correct AnswerverifiedShow Answer

Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is § 1245 depreciation recapture potential of $70,000. As a result of the transfer:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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In a § 351 transaction, the shareholder'...
View Answer

Correct Answer
verified

Correct Answer
verified