7 Multiple Choice Questions:

1. Trampolines, Inc. transfers all its assets to a new corporation, Trogs, Inc., in exchange for its voting stock. The shareholders of Trampolines turn in their stock for all the shares of Trogs. The transaction meets the definition of: a. A Type C reorganization

b. A Type A, C, D, and F reorganization

c. A Type C, D, and F reorganization

d. Both a Type C and a Type D reorganization

2. Singles Apartments Corp., owned by three individuals, shows the following result for the year just ended: Rental income $150,000 Dividend income 7,000 Interest income 12,000 Depreciation 30,000 Mortgage interest 80,000 Property taxes 15,000 Salary 20,000 Dividends paid 14,000 The following statements about Singles Apartments are true, except:

a. It is not a personal holding company.

b. The adjusted ordinary gross income is $24,000.

c. Personal holding company income is $19,000.

d. The ordinary gross income is $169,000.

3. Which of the following does not qualify as accumulations for a reasonable need of a business?

a. Liquid funds kept in anticipation of a death tax redemption from a retired shareholder's estate

b. Marketable securities to be sold to raise the down payment on a new plant

c. Tax-exempt municipal bonds purchased to reduce corporate taxes on its investment portfolio

d. Accumulations for potential product liability

4. The following statements about the corporate alternative minimum tax are all false, except:

a. The alternative minimum tax is an add-on tax.

b. The tax may be fully offset by foreign tax credits and net operating losses.

c. The tax base is unrelated to regular taxable income.

d. Estimated tax payments may have to be made.

5. Ivory, Inc. acquires all the assets of Mammoth, Inc. If the consideration paid is as follows, which transaction qualifies as a Type C reorganization?

a. Nonvoting convertible preferred stock in Ivory worth $500,000 and cash of $500,000.

b. Voting common stock in Ivory worth $750,000, assumption of liabilities of Mammoth of $200,000, plus $50,000 in cash.

c. Voting convertible preferred stock in Ivory worth $550,000 and warrants worth $450,000 to purchase stock in Ivory's subsidiary.

d. Voting common stock in Ivory worth $200,000 and the assumption of $800,000 of Mammoth's liabilities.

6. Abacus, Inc. forms a corporation, Sirius, Inc., by transferring 18 percent of Abacus's stock to it for 100 percent of the stock in Sirius. Sirius, Inc. acquires 90 percent of the stock of Tyrol, Inc. for its stock in Abacus, whereupon Sirius is merged into Tyrol, the latter surviving. These transactions may best be described as:

a. A reverse triangular merger

b. A Section 351 transfer, followed by a Type B reorganization

c. A spin-off

d. The purchase of a subsidiary corporation

7.The Blues brothers each own 50 percent of the stock of Raiders, Inc. After a serious disagreement, they decide to divide the business in two. Raiders, Inc. therefore transfers half its assets to a new corporation, Doolittle, Inc., in exchange for its stock and the other half of its assets to another new corporation, Minimum, Inc., also in exchange for its stock. Both brothers turn in their shares in Raiders, with one brother receiving all of the stock in Doolittle, and the other brother receiving all of the stock in Minimum. Raiders' earnings and profits at the time were $1,000,000. This transaction can best be described as:

a. Spin-off

b. Tax-free split-up

c. Acquisitive Type D reorganization

d. Two Section 351 transactions