Question 1

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Accepted Answer

A) True 
 B)False

Question 2

Stock in Merlin Corporation is held equally by Jane, Eve, and Fred. Merlin seeks additional capital to buy a valuable tract of land that will cost $6,000,000. Jane, Eve, and Fred propose to loan Merlin $2,000,000 each, taking from Merlin a $2,000,000 ten-year note with interest payable annually at five points above the prime rate. Merlin Corporation has current taxable income of $7,000,000. How are the payments on the notes treated for tax purposes?

Accepted Answer

Payments on the notes will probably be t...

Question 3

Ira, a calendar year taxpayer, purchases as an investment stock in Redbird Corporation on November 3, 2014. On February 2, 2015, Redbird Corporation is declared bankrupt, and Ira's stock becomes worthless. Presuming § 1244 (stock in a small business corporation) does not apply, Ira has a short-term capital loss for 2015.

Accepted Answer

A) True 
 B)False

Question 4

Rick transferred the following assets and liabilities to Warbler Corporation.  ​
In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

Accepted Answer

A)   Rick has a recognized gain of $60,000.
B)   Rick has a recognized gain of $75,000.
C)   Rick's basis in the stock of Warbler Corporation is $270,000.
D)   Warbler Corporation has the same basis in the assets received as Rick does in the stock.
E)   None of the above.F) A) and B)
G) D) and E)

Exam 4: Corporations: Organization and Capital Structure

Correct Answer
verified

Rick transferred the following assets and liabilities to Warbler Corporation. In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

Correct Answer
verified

Correct Answer
verified
Payments on the notes will probably be t...
View Answer

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Correct Answer
verified

Exam 4: Corporations: Organization and Capital Structure

Correct AnswerverifiedShow Answer

Rick transferred the following assets and liabilities to Warbler Corporation. ​ In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPayments on the notes will probably be t...View AnswerShow Answer

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Rick transferred the following assets and liabilities to Warbler Corporation. In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

Correct Answer
verified

Correct Answer
verified
Payments on the notes will probably be t...
View Answer

Correct Answer
verified