Chapter C6 Corporate Liquidating Distributions

13) In a complete liquidation of a
corporation, which of the following is false?
A) All stock of the liquidating
corporation is canceled or redeemed.
B) The corporation ceases to be a going
concern.
C) The corporation divests itself of
substantially all its properties.
D) The liquidation of a corporation means
it has undergone dissolution.

14) Identify which of the following
statements is false.
A) The tax attributes of the liquidating
corporation carry over to the shareholders when the liquidation is conducted
under the general liquidation rules.
B) Baker Corporation was formed in a Sec.
351 exchange three years ago by Emil, Fred, and George who own equal stock
interests. The corporation can be liquidated tax-free under the special
liquidation rules of Secs. 332 and 337.
C) The terms “liquidation” and
“dissolution” are synonymous.
D) All of the above are false.

15) When a corporation liquidates, it
performs three activities. What is the general order of these activities in a
plan of liquidation?
A) pay debts, distribute property to
shareholders, and wind up its affairs
B) wind up its affairs, distribute
property to shareholders, pay debts
C) pay debts, wind up its affairs, and
distribute property to shareholders
D) wind up its affairs, pay debts, and
distribute property to shareholders

16) Moya Corporation adopted a plan of
liquidation last year. All but a nominal amount of Moya’s assets are
distributed to its shareholders within the year. Which of the following
statements is not true?
A) The liquidation of Moya Corporation
means the corporation has undergone dissolution.
B) Moya Corporation retains its state
charter.
C) Moya Corporation’s existence is
preserved.
D) Moya Corporation has been liquidated
for tax purposes.

17) Liquidation rules generally are
applied the same to the following organizations except for
A) subsidiary corporations (80%
controlled).
B) C corporations.
C) S corporations.
D) subsidiary corporations (less than 80%
controlled).

18) Riverwalk Corporation is liquidated,
with Juan receiving $5,000 in money and other property having a $6,000 FMV.
Juan’s basis in his Riverwalk stock is $8,000. Upon liquidation, Juan must
recognize a gain of
A) 0.
B) $2,000.
C) $3,000.
D) $11,000.

19) Riverwalk Corporation is liquidated,
with Juan receiving $5,000 in money, other property having a $6,000 FMV, and a
$1,000 mortgage on the property. Juan’s basis in his River walk stock is
$8,000. Upon liquidation, Juan must recognize a gain of
A) 0.
B) $2,000.
C) $3,000.
D) $11,000.
 

20) Texas Corporation is undergoing a
complete liquidation and distributes land to Robert, one of its shareholders,
in exchange for all of Robert’s stock. The land has a basis of $300,000 and an
FMV of $400,000 on Texas Corporation’s books and is subject to a $325,000
liability. Robert assumes the liability on the property. Robert’s basis in his
Texas Corporation stock is $100,000. What is the amount of gain or loss
recognized by Robert on the distribution?
A) $175,000 gain
B) $25,000 gain
C) No gain or loss is recognized.
D) $25,000 loss

21) Robot Corporation is liquidated, with
Marty receiving property having an adjusted basis of $60,000 and an FMV of $90,000.
The property is subject to a $80,000 mortgage, which Marty assumes. Marty’s
basis in the Robot stock surrendered is $50,000. Marty must recognize
A) a $40,000 loss.
B) no gain or loss.
C) a $60,000 gain.
D) none of the above

22) Identify which of the following statements
is true.
A) The method of accounting used by
shareholders involved in a complete liquidation is relevant when determining
the year in which the shareholder’s gain or loss should be reported.
B) An accrual method of accounting
taxpayer recognizes his/her realized gain on a corporate liquidation when there
has been actual or constructive receipt of the liquidating distribution(s).
C) If a shareholder assumes or acquires
liabilities of the liquidating corporation, the amount of these liabilities does
not reduce the amount realized by the shareholder.
D) All of the above are false.