1. ________ Crow Corporation has 800 shares of common stock outstanding. Ted owns 300

shares. Teds mother owns 100 shares. Teds sister owns 80 shares, and Teds daughter

owns 120 shares. Bluebird Corporation owns 100 shares. Ted owns 70% of the stock in

Bluebird Corporation. In applying the attribution rules of 318, which apply to stock

redemptions, how many shares does Ted own in Crow Corporation?

a. 300.

b. 520.

c. 590.

d. 670.

2. ________ Pursuant to a complete liquidation, Oriole Corporation distributes to its

shareholders land with a basis of $350,000 and a fair market value of $800,000. The land

is subject to a liability of $920,000. What is Orioles recognized gain or loss on the

distribution?

a. $0.

b. $120,000 loss.

c. $450,000 gain.

d. $570,000 gain.

3. ________ James and his daughter are the sole owners of Wren Corporation. James

terminates his entire stock ownership in Wren Corporation. One year later, James loans

Wren Corporation $200,000. Because of the loan, the termination of Jamess stock

ownership the year before can no longer be treated as a complete termination redemption.

a. True.

b. False.

4. ________ Bluebird Corporation has 100 shares of stock outstanding. It redeems 40

shares for $200,000 at a time when it has paid-in capital of $150,000 and E&P of

$200,000. What would be the reduction to E&P as a result of the redemption?

a. $20,000.

b. $80,000.

c. $100,000.

d. $200,000.

5. ________ Scarlet Corporation, the parent corporation, has a basis of $600,000 in the

stock of Brown Corporation, a subsidiary in which it owns 90% of all classes of stock.

Scarlet purchased the stock in Brown 10 years ago. In the current year, Scarlet

Corporation liquidates Brown Corporation and acquire assets worth $800,000 and with a

tax basis to Brown Corporation of $950,000. What basis will Scarlet Corporation have in

the assets acquired from Brown Corporation?

a. $0.

b. $600,000.

c. $800,000.

d. $950,000.

6. ________ The stock of Loon Corporation is held as follows: 85% by Duck Corporation and

15% by Gerald, an individual. Loon Corporation is liquidated in December of the current

year, pursuant to a plan adopted earlier in the year. Loon distributes land with a basis of

$350,000 and a fair market value of $390,000 to Gerald in liquidation of his stock interest.

Gerald had a basis of $200,000 in his Loon stock. How much gain will Loon Corporation

recognize in this liquidating distribution?

a. $0.

b. $40,000.

c. $190,000.

d. $390,000.

7. ________ Black Corporation acquired equipment in a 351 transaction with an adjusted

basis of $200,000 and a fair market value of $110,000, on January 10, 2019. Black

Corporation adopted a plan of liquidation on July 30, 2019. On November 15, 2019, when

the value of the equipment had declined to $50,000, Black Corporation distributed the

equipment to Chris, a shareholder who owns 20% of the stock in Black Corporation. Black

Corporation never used the equipment for any business purpose during the time it owned

the equipment. How much loss can Black Corporation recognize on the distribution of the

equipment?

a. $0.

b. $150,000.

c. $90,000.

d. $60,000.

8. ________ Caitlin owns 160 shares in Parakeet Corporation. Caitlin has a 25% beneficiary

interest in her deceased grandmothers estate. The estate owns 200 shares in Parakeet

Corporation. None of the other beneficiaries owns stock in Parakeet. In applying the

318 attribution rules to redemptions:

a. The estate owns 240 shares.

b. Caitlin owns 360 shares.

c. Caitlin owns 210 shares.

d. The estate owns 200 shares.

9. ________ Mars Corporation merges into Jupiter Corporation by exchanging all of its

assets for 300,000 shares of Jupiter stock valued at $2 per share, $100,000 cash and the

assumption of all its liabilities. Wanda, the sole shareholder of Mars, surrenders her Mars

stock (basis $900,000) and receives all the Jupiter stock transferred to Mars plus the

$100,000 in cash. How dos Wanda treat this transaction on her tax return?

a. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.

b. Wanda realizes a $200,000 loss, none of which is recognized. Her Jupiter stock

basis is $800,000.

c. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.

d. Wanda realizes a $200,000 loss, of which $100,000 is recognized. Her Jupiter stock

basis is $700,000.

10. ________ Whydah Co. is owned by Gilda and her four nieces and nephews. Gilda owns

all of the Whydah Co. voting stock and its $50,000 bond. She wants to relinquish control

of the entity. Accordingly, Whydah Co. redeems all of Gildas voting common stock and

issues her its preferred stock. She also exchanges her bond for preferred stock. The

nonvoting preferred shares owned by the nieces and nephews are exchanged for voting

common stock. Which of the following statements is correct?

a. The exchange of a bond for preferred stock is taxable.

b. The exchange of common for preferred is not taxable, but the exchange of preferred

stock for common stock is taxable.

c. All these transactions are taxable.

d. This transaction is not currently taxable; this is a Type E reorganization.

11. ________ In 2011, Floyd carried out a successful complete termination redemption of his

stock in Gray Corporation. In 2019, Floyd inherits stock in Gray Corporation from his

father. Floyd has not violated the 10-year rule for complete termination redemptions.

a. True.

b. False.

12. ________ During the current year, Everbrite Corporation is liquidated and distributed its

only asset, land, to Mackenzie, the sole shareholder. On the date of distribution, the land

has a basis of $250,000, a fair market value of $650,000, and is subject to a liability of

$500,000. Mackenzie, who takes the land subject to the liability, has a basis of $120,000

in the Everbrite stock. With respect to the distribution of the land, which of the following

statements is correct?

a. Mackenzie recognizes a gain of $530,000.

b. Everbrite Corporation recognizes a gain of $250,000.

c. Mackenzie recognizes a gain of $30,000.

d. Mackenzie has a basis of $250,000 in the land.

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13. ________ Target Corporation transfers assets with a fair market value of $300,000 (basis

of $200,000) to Acquiring Corporation for voting stock in Acquiring worth $220,000, cash

of $60,000, and the assumption by Acquiring of liabilities of Target in the amount of

$20,000. Target then distributes the Acquiring stock and the cash to its shareholders in

exchange for all their stock in Target Corporation and liquidates. This transaction qualifies

as a Type C reorganization.

a. True.

b. False.

14. ________ The stock in Rhea Corporation is owned by Jennifer (80%) and Lucy (20%),

mother and daughter. In a liquidation of the corporation in the current year, Rhea

distributes land that it purchased two years ago for $675,000 to Lucy. The property has a

fair market value of $450,000 on the date of distribution. One year later, Lucy sells the

land for $400,000. What loss, if any, will Rhea Corporation recognize with respect to the

distribution of land?

a. $0

b. $45,000

c. $225,000

d. $275,000

15. ________ In the current year, distributes all its property in a complete liquidation.

Alexandra, a shareholder, receives land having a fair market value of $200,000. Dove

Corporation purchased the land three years ago as an investment for $125,000, and the

land was distributed subject to a $100,000 liability. Alexandra took the land subject to the

$100,000 liability. What is Alexandras basis in the land?

a. $0

b. $100,000

c. $125,000

d. $200,000

16. ________ Corporate shareholders may receive less favorable tax treatment from a

qualifying stock redemption than from a dividend distribution.

a. True

b. False