(Major : Corporate Taxation)

Riverfront Properties, Inc. acquired all the assets and liabilities of Mississippi Hotels LLC. The accountants at Riverfront Properties, Inc. have allocated $20 million of the purchase price to the hotel furniture and fixtures intending to deduct the amount in the current year as first-year depreciation. In calculating its gain on the sale, Mississippi Hotels LLC allocated only 5 million to the furniture and fixtures, recognizing ordinary income on the depreciation recapture. It allocated the remaining $15 million to its Mississippi Suites brand name. Allocating the additional $15 million to the brand name allows Mississippi Hotels LLC to increase the capital gain recognized on the sale. Allocating the $15 million to the furniture and fixtures would cause Mississippi LLC to recognize this additional amount as ordinary income.

State on each statement below whether it is true or false

a. The Tax Courts decision in Danielson vs. Commissioner, 50 TC 782 (1968). would allow the IRS to require the parties uniformly allocate the asset values. (True or False?)

b. Filing an election under section 338(g) would allow the parties to treat the transaction as a sale of stock. (True or False?)

c. Section 1060 requires Riverfront Properties, Inc. to allocate asset values based on the residual method. (True or False?)