MODULE 36

·
TAXES: CORPORATE
-, -I

617
I

MULTIPLE-CHOICE ANSWERS

I. c - - 29. a - - 57. d - - 85. c - - 113. b - - 14I. c - -

2. c - - 30. d - - 58. a - - 86. c - - 114. c - - 142. d - -
3. d - - 3I. a - - 59. c - - 87. .d ,- - 115. b - - 143. b - -
4. d - - 32. d - - 60. c - - 88. c - - 116. c - - 144. c - -
5. c - - ·33. c - - 61. d '- - 89. c - - 117. d - - 145. d - -
6. a - - 34. d - - 62. c - - 90. b - - 118. d - - 146. d - -
7. d - - 35. a - - 63. c - - 9I. d - - 119. b - - 147. d - -
S. a - - 36. a - - 64. c - - 92. a - - 120. c - - 148. d - -
9. c - - 37. d - - 65. d - - 93. c - - 121. d - - 149. b - -
10. b - - 38. c - - 66. d - - 94. a - - 122. d - - 150. c - -
11. c -
39. b -
67. c - - 95. b -
123. a ,-- 15I. d.~ -
- - - -
12. d - - 40. d - - 68. d - - 96. a - - 124. c - 152. a - -
13. a - - 41. a - - 69. c - - 97. d - - 125. b - - 153. b - -
14. b - - 42. d - - 70. a - - 98. d - - 126. cl - - 154. b - -
15. b - - 43. a - - 7I. d - 99. b - - 127. b - - 155. a - -
16. a - - 44. c -
- 72. a - - 100. d - - 128. d - - 156. c - -
17. c - - 45. d - - 73. d - - 10 I. a - 129. a - - 157. d - -
18. d - - 46. c - - 74. d' - - 102. c - - 130. d - - 158. a - -
19. c - - 47. b - - 75. d - - 103. d - - 13I. b - - 159. c - -
20. b - - 48. b - - 76. b - - 104. d - - 132. b - - 160. a - -
21,. b - - 49. b - - 77. d - - 105. b - - 133. d - - 161. a - -
22. a - - 50. b - - 78. c - - 106. a - - 134. c - - 162. a - -
23. c - - 5I. b - - 79. b - - 107. c - - 135. d - - 163. b - -
24. c - - 52. b - - 80. b - - 108. d - - 136. b - -
25. IC - - 53. b - - 8I. a - - 109. a - - 137. c - -
26. b
-- - 54. b
- - 82. c
-- - 110. b
- - 13,8. c
- - ,
27. d - 55. d - - 83. c - 11 I. c - - 139. b - - 1 t: _/163 = - %
28. c - - 56. c - - 84. c - - 112. d - - 140. d - - 2nd: _/163 = - %
MULTIPLE-CHOICE ANSWER EXPLANATIONS
A. Transfers to a Controlled Corporation control of the corporation immediately after the exchange.
/ "Control" means that the transferors of property must, in the
1. "(c) The requirement is to determine Dexter Corpora-
aggregate, 'own at least 80% of the corporation's stock im-
tion's tax basis for the property received in the incorporation
mediately after the exchange. Since both Beck and Carr
from Alan. Since A1an and Baker .are the only transferors of
transferred property in exchange for stock, and in the aggre-
property and they, in the-aggregate, own only 800 of the
gate they own 90% of Flexo's stock immediately after the
1,050 shares outstanding immediately after the incorpora-
exchange, the requirements for uonrecognition are met.
tion, Sec. 351 does not apply to provide nonrecognition
treatment for Alan's transfer of property. As a result, Alan 4. (d) The requirement is to determine the percentage
is taxed on his realized gain of $15,000, and Dexter Corpo- of Nu's stock that Jones must own to qualify for a tax-free
ration has a cost (i.e., FMV) basis of $45,000 for the trans- incorporation. No gain or loss is recognized if property is
ferred property. transferred to a corporation solely in exchange for stock and
2. (c) The requirement is to determine Clark's basis the transferor(s) are in control of the corporation immedi-
ately after the exchange. For this purpose, the term "con-
for the Jet Corp. stock received in exchange for a contribu-
trol" means the ownership of at least 80% of the combined
tion of cash and other property. Generally, no gain or loss is
voting power of stock entitled to vote, and at least 80% of
recognized if property is transferred to a corporation solely
each class of nonvoting stock.
in exchange for stock, if immediately after the transfer, the
transferors of property are in control of the corporation. S. (c) The requirement is to determine Feld's stock
Since Clark and Hunt both transferred property solely in basis following the contribution Of a parcel of land to his
exchange for stock, and together own all of the corporation's solely owned corporation. When a shareholder makes a
stock, their realized gains on the "other property" transferred contribution to the capital of a corporation; no gain or loss is
are not recognized. As a result, Clark's basis for his Jet recognized to the shareholder, the corporation has a trans-
stock is equal to the $60,000 of cash plus the $50,000 ad- ferred (carryover) basis for the property, and the share-
justed basis of other property transferred, or $11 0,000. holder's original stock basis is increased by the adjusted
Hunt's basis for his Jet stock is equal to the $120,000 ad- basis of the additional property contributed. Here, Feld' s
justed basis of the other property that he transferred. beginning stock basis of $50,000 is increased by the $10,000
3. (d) The requirement is to determine Carr's recog- basis for the contributed land, resulting in a stock basis of
$60,000.
nized gain on the transfer of appreciated property in connec-
tion with the organization of Flexo Corp. No gain or loss is 6_ (a) The requirement is to determine whether gain or
recognized if property is transferred to a corporation solely loss is recognized On the incorporation of Rela Associates (a
in exchange for stock, if the transferors of property are in partnership). No gain or loss is recognized if property is