Chapter 19 Corporate Formation, Reorganization, and Liquidation

1. [LO 1] Discuss the difference between gain realization and
gain recognition in a property transaction.
2. [LO 1] What
information must a taxpayer gather to determine the amount realized in a property transaction?
.
3. [LO 1] Distinguish between exclusion and deferral as it
relates to a property transaction.
4. [LO 1] Contrast
how a taxpayer’s tax basis in property received in a property transaction will
be affected if the transaction results in gain exclusion versus gain deferral.
5. [LO 1] What
information must a taxpayer gather to determine the adjusted basis of property exchanged in a property transaction?
6. [LO 2] Why does
Congress allow tax deferral on the formation of a corporation?

7. [LO 2] List the key statutory requirements that must be met
before a corporate formation is tax-deferred under §351.
8. [LO 2] What is the definition of control for purposes of §351?
Why does Congress require the shareholders to control a corporation to
receive tax deferral?

9. [LO 2] What is a substituted
basis as it relates to stock received in exchange for property in a §351
transaction? What is the purpose of
attaching a substituted basis to stock received in a §351 transaction?

10. [LO 2] Explain whether the receipt of boot
by the shareholder in a §351 transaction causes the transaction to be fully
taxable.
11. [LO 2] Explain
whether a corporation’s assumption of shareholder liabilities will always
constitute boot in a §351 transaction. .

12. [LO 2] How does the tax treatment differ in
cases where liabilities are assumed with a tax avoidance purpose versus where
liabilities assumed exceed basis? When
would this distinction cause a difference in the tax consequences of the
transactions?
13. [LO 2] What is a carryover basis as it relates to
property received by a corporation in a §351 transaction? What is the purpose of attaching a carryover
basis to property received in a §351 transaction?

14. [LO 2] Under what circumstances does
property received by a corporation in a §351 transaction not receive a
carryover basis? What is the reason for
this rule?

15. [LO 2] How does a corporation depreciate an
asset received in a §351 transaction in which no gain or loss is recognized by
the transferor of the property?
16. [LO 2] Explain if
the tax consequences are the same whether a shareholder contributes property to
a corporation in a §351 transaction or as a capital contribution.
17. [LO 2] Why might a
corporation prefer to characterize an instrument as debt rather than equity for
tax purposes? Are the holders of the
instrument indifferent as to its characterization for tax purposes?
18. [LO 2] Under what
conditions is it advantageous for a shareholder to hold §1244 stock? Why did Congress bestow these tax benefits on
holders of such stock?
19. [LO 3] Why does
the acquiring corporation usually prefer to buy the target corporation’s assets
directly in an acquisition?
20. [LO 3] Why do the
shareholders of the target corporation usually prefer to sell the stock of the
target corporation to the acquiring corporation?