Question 1
3.33333 out of 3.33333 points
Cardinal, the parent corporation, has a basis of $440,000 in the stock of Vulture
Corporation, a subsidiary in which it owns 90% of all classes of stock. Cardinal
purchased th
...
Question 1
3.33333 out of 3.33333 points
Cardinal, the parent corporation, has a basis of $440,000 in the stock of Vulture
Corporation, a subsidiary in which it owns 90% of all classes of stock. Cardinal
purchased the stock in Vulture Corporation 10 years ago. In the current year,
Cardinal Corporation liquidates Vulture Corporation and acquires assets worth
$500,000 with a tax basis to Vulture Corporation of $380,000. What basis will
Cardinal Corporation have in the assets acquired from Vulture Corporation? (Ch6 L4
Pg2)
Selected
Answer: $380,00
0.
Answers:
$380,00
0.
$500,00
0.
$ -
0-.
$440,00
0.
Response
Feedback:
Unless a parent corporation elects under Section 338, property
received by the parent corporation in a complete liquidation of its
subsidiary under Section 332 has the same basis it had in the hands
of the subsidiary. The parent's basis in stock of the liquidated
subsidiary disappears. Example 39
Question 2
3.33333 out of 3.33333 points
What amount of accumulated earnings of a manufacturing corporation is
considered within the reasonable needs of a business without the corporation
having to show a bona fide business reason for the accumulation? (Ch3 L1 Pg15)
Selected
Answer: $250,000 or
less.
Answers:
$250,000 or
less.
$300,000 or
less.
$200,000 or
less.
$150,000 or
less.
Response
Feedback:
The minimum Accumulated Earnings Credit for most corporations is
$250,000, however, for certain Personal Service Corporations, the
credit is limited to $150,000. p. 6 13
Question 3
0 out of 3.33333 points
Susie exchanges stocks she owns in Quasar Corporation for stock in Lunar
Corporation plus a bond worth $74,000 (principal amount of $70,000). The
exchange is pursuant to a tax-free reorganization of both corporations. Susie paid
$260,000 for the stock in Quasar four (4) years ago. The Lunar stock is worth
$360,000. Susie recognizes gain on the transaction of: (Ch7, in book 7-1b example
3)
Selected
Answer: $100,0
00.
Answers: $100,0
00.
$74,00
0.
$70,00
0.
$-0-.
Response
Feedback
:
Susie's gain is $74,000, the fair market value of the bond. Gain is
recognized when the principal amount of the securities received is
greater than the principal amount of the securities surrendered. Susie
surrendered no bonds. The amount of gain recognized is equal to the
fair market value of the excess securities received. p. 7-7, Example 3,
and Section 356(a)
Question 4
3.33333 out of 3.33333 points
A personal service corporation engaged in health care has $250,000
of Accumulated Earnings And Profits at the end of 2017. During 2018,
the corporation accumulated an additional $80,000 of
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