Need answers to all posted MCQ. No need for explanations. Only attempt if you will answer all posted questions.

6. ABC Corporation acquired 100 percent of the stock of GAP, Inc. for $500,000 in one transaction and immediately made a Code Sec. 338 election to treat the acquisition as an asset purchase. GAPs tangible assets were worth $450,000, had a basis of $300,000 and earnings and profits were $100,000. Which of the following statements is incorrect?

a. GAP is subject to the recapture of cost recovery deductions on a deemed sale of its assets.

b. GAP will have a basis in its assets of $300,000.

c. GAP may file consolidated returns with ABC after the Code Sec. 338 election becomes effective.

d. GAP may be subject to ITC recapture on the deemed sale of its assets.

7. Betty contributed to AlphaBeta Corporation a building with an adjusted basis to Betty of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Alfie contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. How much gain or loss, if any, does Betty recognize with respect to this transaction?

a. $0.

b. $10,000.

c. $70,000.

d. $100,000.

8. ABC, Inc. distributed land with a basis of $20,000, a fair market value of $75,000, subject to a liability of $35,000 to Alfie, a noncorporate shareholder, when the corporations earnings and profits were $300,000. As a result of the distribution, the amount of the dividend and the shareholders basis in the distributed property are as follows:

a. Dividend: $40,000; basis: $40,000.

b. Dividend: $20,000; basis: $20,000.

c. Dividend: $40,000; basis: $40,000.

d. Dividend: $40,000; basis: $75,000.

e. None of the above is correct.

9. ABC Corporation owns 80 percent of DEF Corporations stock and Linda owns the remaining 20 percent of DEFs stock. ABC Corporations basis for its DEF stock is $300,000 and Lindas basis in her DEF stock is $80,000. Pursuant to a plan of complete liquidation of DEF Corporation, ABC Corporation receives property with a $400,000 adjusted basis to DEF Corporation and a $480,000 fair market value, and Linda receives property with a $130,000 adjusted basis to DEF Corporation and a $120,000 fair market value. The basis of the properties to ABC Corporation and to Linda in the property distributed to them are:

a. ABC: $480,000 Linda: $120,000.

b. ABC: $400,000; Linda: $130,000.

c. ABC: $300,000; Linda: $80,000.

d. ABC: $400,000;Linda: $120,000.

10. Henry, Hendred, and Hendel, who are brothers, own all of the stock in New Corporation with earnings and profits of $1,200,000 as follows: Henry own 1,300 shares; Hendred owns 400 shares; and Hendel owns 300 shares. New Corporation redeems 300 of Henrys shares with a basis of $60,000 for $450,000. With respect to the distribution in redemption of the stock:

a. Henry has a capital gain of $390,000.

b. Henry has dividend income of $450,000.

c. Henry has dividend income of $390,000.

d. Henry has a capital gain of $450,000.

11. Devitt transferred real estate to a corporation in a transaction that qualifies as a Code Section 351 transaction. The real estate was a capital asset in Devitts hands and will also be a capital asset when held by the corporation. Devitts basis in the real estate was $10,000 and the value of the real estate was $8,000 on the date of the transfer. Devitt received $2,000 in cash and 100 shares of stock from the corporation in exchange for the real estate. What is Devitts basis in the stock she received and what is the corporations basis in the real estate?

a. Devitts stock basis is $8,000; Corporations basis in the real estate is $8,000

b. Devitts stock basis is $10,000; Corporations basis in the real estate is $10,000

c. Devitts stock basis is $10,000; Corporations basis in the real estate is $8,000

d. Devitts stock basis is $6,000; Corporations basis in the real estate is $12,000

12. Happy Corporation and Cheerful Corporation are considering a merger. Cheerful Corporation will be the surviving corporation. Cheerful Corporation will acquire Happy Corporations tax attributes

a. only if the the shareholders of both corporations agree to the acquisition of the tax attributes.

b. if the transaction qualifies as a Type A reorganization.

c. only if a Code Section 332 liquidation follows.

d. The acquiring corporation obtains the targets tax attributes in all of the above.

e. None of the above.

13. Happy Corporation and Cheerful Corporation are considering a merger. Cheerful Corporation will be the surviving corporation. Cheerful Corporation will acquire Happy Corporations liabilities

a. only if the the shareholders of both corporations consent to Cheerful Corporations becoming liable for Happy Corporations liabilities.

b. under state law.

c. only if the transaction qualifies as a Type A merger.

d. only in a taxable transaction.

e. None of the above.

14. Jack owns some of the stock in Cards Corporation. Jack has a basis of $25,000 in his Cards Corporation stock, which stock currently has a fair market value of $150,000. Upon the merger of Cards Corporation into Checkers Corporation, Jack receives Checkers Corporation preferred stock worth $100,000 and Checkers Corporation common stock worth $50,000. Jack recognizes a gain of

a. $125,000.

b. $50,000.

c. $0.

d. We do not have sufficient information to answer this question.