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Corporate Tax > Ch 7 Part 2 > Flashcards

Ch 7 Part 2 Flashcards

0
Q

Taxable acquisition vs. nontaxable reorganization: target corporation’s amount of gain or loss (2 things taxable, 3 things non)

A

Taxable: all gains or losses recognized, installment method
Available if payments deferred

Non: generally no gain/loss recognized, gain recognized when
Target corp. receives boot or does not distribute boot property
To its shareholders

Gain also recognized on distribution of appreciated boot or
Retained earnings

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1
Q

Taxable acquisition vs. nontaxable reorganization: consideration used in acquisition

A

Taxable: primarily cash and debt instruments, may involve
Some stock of acquiring corp.

Non: primarily voting stock and limited amount of cash/debt

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2
Q

Taxable acquisition vs. nontaxable reorganization: target corporation -depreciation recapture

A

Taxable: Sec. 1245 and 1250 depreciation recaptured

Non: sec. 1245 and 1250 depreciation not recaptured unless
Boot triggers recognition of gain

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3
Q

Taxable acquisition vs. nontaxable reorganization: acquiring corporation- gain or loss when stock is exchanged for property

A

Taxable: none recognized

Non: none recognized

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4
Q

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - gain or loss when boot is exchanged for property

A

Same for Taxable and non: gain or loss recognized if noncash
boot property is Transferred to target corporation

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5
Q

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - basis of acquired assets

A

Taxable: cost

Non: same as target corporation’s basis increased by gain
recognized

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6
Q

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - holding period of acquired assets

A

Taxable: begins day after transaction date

Non: includes holding period of target corp

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7
Q

Taxable acquisition vs. nontaxable reorganization: acquiring corporation - acquisition of target corporation tax attributes

A

Taxable: no

Nontaxable: yes

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8
Q

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - amount of gain or loss

A

Taxable: realized gain or loss is recognized, installment method
Available if payments are deferred

Non: realized gain is recognized to extent of boot received,
Realized losses are not recognized

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9
Q

Taxable acquisition vs. nontaxable reorganization: target corporation - character of gain or loss

A

Both taxable and non: depends on nature of each asset

distributed

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10
Q

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - character of gain or loss

A

Taxable- capital gain or loss, maybe sec. 1244 loss

Non: capital gain, or dividend if boot is received

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11
Q

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - basis of stock and securities received

A

Taxable: cost, generally FMV of stock or other securities received

Non: substituted basis referenced to the stock and securities
Surrendered, FMV for boot property

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12
Q

Taxable acquisition vs. nontaxable reorganization: target corporation shareholders - holding period of stock and securities received

A

Taxable: begins day after transaction date

Non: includes holding period for stock and securities surrendered,
Day after transaction date for boot property

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13
Q

Taxable acquisition vs. nontaxable reorganization: target corporation - parent subsidiary relationship established

A

Yes for both taxable and nontaxable

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14
Q

Taxable acquisition vs. nontaxable reorganization: target corporation - consolidated return election available

A

Yes for both taxable and nontaxable

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15
Q

Taxable acquisition vs. nontaxable reorganization: target corporation - basis in assets

A

Taxable: unchanged by stock acquisition unless sec. 338 election
Is made

Non: unchanged by stock acquisition, no sec. 338 election
Available

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16
Q

Taxable acquisition vs. nontaxable reorganization: target corporation - tax attributes

A

Retained by target corporation for both taxable and nontaxable

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17
Q

In a reorganization, because the target corporation recognizes no gain on asset transfer, the carryover basis is…

A

Not stepped up

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18
Q

Section 354: shareholders in reorganization 1 thing

Section 356? 2 things

A

Shareholders recognize no gain or loss if they receive acquires
Stock in exchange for target corps stock in reorganization

Sec. 356 has shareholders recognize gain to extent that they
Receive boot and no qualifying property that doesn’t represent
Continuation of equity interest

Shareholder recognize gain to extent of lesser of realized gain
Or amount of cash received + FMV of noncash property received

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19
Q

Under section 354, when is the receipt of securities taxable?

A

When principal amount of securities (other than stock) received
Exceeds principal amount of securities surrendered

FMV of excess constitutes boot, ex. Debt securities

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20
Q

Sec. 358: basis of stock and securities (nonrecognition property) received by target corporation shareholders and security holders

A

Basis of nonrecognition property received =
Adjusted basis of stock and securities surrendered
+ any gain recognized in exchange
- cash received in exchange
- FMV of noncash property received in exchange

21
Q

Type A reorganizations encompass which four transactional structures?

A

1 mergers
2 consolidations
3 triangular mergers
4 reverse triangular mergers

22
Q

Type A reorganization - merger or consolidation: the target corporation property acquired

A

Assets and liabilities of target corporation

23
Q

Type A reorganization - merger or consolidation: consideration that can be used

A

Voting and non voting stock, securities and property of acquiring
Corporation

24
Q

Type A reorganization - merger or consolidation: what happens to target corporation

A

Target corporation liquidates as part of merger

25
Q

Type A reorganization - merger or consolidation: shareholders’ recognized gain

A

Lesser of realized gain or FMV of boot received

26
Q

Requirements for Type A reorganization: it’s purpose

A

Transaction must have business purpose and meet continuity of interest and business enterprise requirements

27
Q

Type B reorganization - stock for stock: target corporation property acquired

A

At least 80% of voting and non voting target corporation stock

28
Q

Type B reorganization - stock for stock: consideration that can be used

A

Voting stock of acquiring corporation

29
Q

Type B reorganization - stock for stock: what happens to target corporation

A

Becomes subsidiary of acquiring corporation

30
Q

Type B reorganization - stock for stock: shareholders’ recognized gain

A

None

31
Q

Requirements for type B reorganization: boot paid by transferor

A

Boot paid by transferor might render entire transaction taxable

32
Q

Type C reorganization - assets for stock: target corporation property acquired

A

Substantially all target corp. assets and possibly some or all
Of its liabilities

33
Q

Type C reorganization - assets for stock: consideration that can be used

A

Acquiring corporation stock, securities and other property,

Provided at least 80% of assets are acquired for voting stock

34
Q

Type C reorganization - assets for stock: what happens to the target corporation .

A

Target corporation liquidates

35
Q

Target corporation liquidation

A

Acquiring Stock, securities and boot received in reorganization
and all Of target corp’s remaining properties must be distributed
to Shareholders and creditors

Target corporation receives all its target stock and securities
From its shareholders

36
Q

Type C reorganization - assets for stock: shareholder’s recognized gain

A

Lesser of realized gain or FMV of boot property

37
Q

Type C reorganization - assets for stock: for advanced ruling purposes what does, “substantially all” mean

A

70% of gross assets and 90% of net assets of T corporation

38
Q

Type D reorganization - acquisitive: target corporation property acquired

A

Substantially all target corps assets and possibly some or all of
It’s liabilities

39
Q

Type D reorganization - acquisitive: consideration that can be used

A

Acquiring corporation stock, securities and other property

40
Q

Type D reorganization - acquisitive: what happens to target corporation

A

Target corporation liquidates

41
Q

Type D reorganization - acquisitive: shareholders’ recognized gain

A

Lesser of realized gain or FMV of boot received

42
Q

Type D reorganization - acquisitive: 3 requirements to be considered type D

A

1 “substantially all” is same as in type C

2 continuity if interest requirement applies

3 control is defined as 50% voting power or 50% value of
Acquiring corporation stock

43
Q

How is a type A reorganization unique in comparison to other
statutory reorganizations?

A

Corporation law is an important factor in determining whether
Transaction qualifies as a nontaxable merger

44
Q

Type A reorganization

A

Merger or consolidation that satisfies the corporation laws of
The US, a state, the District of Columbia or a foreign country

45
Q

Type A merger, most common type

A

Involves acquiring corp. transferring its stock, securities and
Boot to target corporation in exchange for its assets and
Liabilities

46
Q

Another form of Type A merger

A

Acquiring corporation exchanges it’s stock, securities and
Other consideration directly for target corp stock and securities
Held directly by target corp. shareholders and creditors

47
Q

Type A consolidation, 2 types (similar to merger)

A

A New corporation uses stock, securities and other consideration
To acquire assets of 2 or more existing target corporations

Other type: new acquiring corp transfers it’s stock, securities,
And boot directly to target corp shareholders and creditors
In exchange for their stock and securities

48
Q

Section 368 makes a Type A reorganization…

A

The must flexible reorganization by placing no restrictions on
Kind of consideration that can be used

49
Q

Type A reorganization merger: what are its 2 steps?

A

1 acquiring stock and possibly other securities transferred to
T corp in exchange for T corp’s assets and liabilities

2 Acquiring stock and any securities and consideration received
Is transferred to T corp shareholders in exchange for their T stock
Securities

50
Q

What is the post reorganization structure of a type A merger?

A

Acquiring and Target’s former shareholders/creditors own A corp. stock, which owns Assets and liabilities of A and T corps

Corporate Tax (23 decks)

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