Abby and Bera are forming a Delaware corporation, AB Co. Abby contributes $100 cash in exchange for 50% of the AB Co. Bera contributes a painting, which is worth $100 in exchange for 50% of the AB Co. Beras basis in the painting immediately before the contribution was $80.

1. Which of the following statements regarding a corporate distribution is incorrect?

A distribution is treated as a dividend to the extent of the distributing corporations earnings and profits.

To the extent the amount of distribution is in excess of the distributing corporations earnings and profits, the entire amount is treated as gain from sale of property.

A distributing corporation is required to recognize gain when distributing appreciated property.

A corporate shareholder is entitled to a dividends received deduction even if the corporate shareholder is not a majority owner.

2. Which of the following statements regarding a corporate liquidation is correct?

The distribution received from a corporate liquidation is treated as a dividend to the extent of the liquidating corporations earnings and profits.

In a complete liquidation, the basis in the property received by an individual shareholder is the same basis as in the hands of the liquidating corporation.

To qualify for a subsidiary liquidation under 332, the parent must own at 80% of the voting power and 80% of the value of the subsidiary.

To qualify for a subsidiary liquidation under 332, the distribution of all property must be completed within two years.

3. Which one of the following statements is incorrect regarding an A reorganization?

In determining whether the continuity of interest requirement is satisfied, the value of the consideration is determined on the date the merger is consummated.

An A reorganization requires a statutory merger.

The continuity of interest requirement under an A reorganization can be satisfied when half of the shareholders of the target company is cashed out by the acquiring company.

The continuity of interest requirement under an A reorganization is failed when the target company or its shareholders only receives securities in the acquiring corporation.