Part 2 (14 pts.)

The 200 shares of Long Corporations common stock are held as follows: The shareholders and # of shares are listed below.

Matt 50 Shares

Mark 60 Shares

Jason 90 Shares

Matt purchased shares for $200 each on September 30, 2016. Assume Matt, who is Marks

father, sells 40 of his shares to the Corporation for $12,000.

(1) Will the sale qualify as a substantially disproportionate (or disproportionate) redemption?

In your answer, discuss the requirements for a substantially disproportionate

redemption and show supporting computations.

(2) Will the sale qualify as a redemption that is not essentially equivalent to a dividend?

Provide an explanation for your conclusion.

(3) Without prejudice to your answer in Parts (1) or (2), assume that the sale qualifies as a

substantially disproportionate redemption. What will be the amount and nature of the

income Matt must recognize (assume the sale took place on March 1, 2020, and that

Part 3 (18 pts.)

Target has assets with a fair market value of $4,000,000, a basis of $1,000,000, and liabilities of

$800,000. It transfers assets worth $3,800,000 to Acquiring in exchange for voting stock worth

$3,000,000 and the assumption of all $800,000 of its liabilities by Acquiring. Target retains a

building worth $200,000, basis of $80,000. After the exchange with Acquiring, Target distributes

the voting stock in Acquiring and the building to Oprah, Targets sole shareholder, in exchange

for Oprahs shares in Target. Oprah has a basis of $740,000 in her stock in Target.

Required:

(1) Does the reorganization described above qualify as a Type A reorganization?

In your answer, discuss the requirements for a Type A reorganization and show

supporting computations.

(2) Does the reorganization described above qualify as a Type C reorganization?

In your answer, discuss the requirements for a Type C reorganization and show

supporting computations.

(3) Without prejudice to your answers above, assume that this transaction qualifies as a

Type C reorganization. What gain, if any, is recognized by:

a. Acquiring?

b. Target?

c. Oprah?

Show supporting computations for your answers to Part (3) as appropriate.

(4) What will Oprahs basis be in her Acquiring stock?

Show supporting computations

Longs E&P for 2020 is $75,000).

(4) What effect will the sale have on Longs E&P balance?

Part 4 (8 pts.)

McIlroy has two shareholders, Kelsey and Katie. They purchased their stock in McIlroy ten

years ago at a cost of $25,000 each. McIlroy has manufactured golf equipment and soccer

equipment for the past ten years. In the current year, McIlroy transfers all the assets used to

manufacture golf equipment to Koepka Corporation for all the stock in Koepka. The assets

transferred to Koepka have a fair market value of $300,000 and a basis of $100,000. The stock

in Koepka is also worth $300,000. McIlroy then exchanges all the stock in Koepka for all of

Kelseys stock in McIlroy.

(1) Does this transaction satisfy the requirements for a Type D reorganization?

In your answer, discuss the requirements for a Type D reorganization and whether

they are satisfied in this case.

(2) Without prejudice to your answer in Part (1), assume the transaction qualifies as a Type

D reorganization. How much gain do McIlroy, Koepka, and Kelsey recognize?

(3) What is Koepka basis in the assets transferred to it by McIlroy?

(4) What is Kelseys basis in her Koepka stock?

Part 5 (7 pts.)

Aurora Corporation exchanges $700,000 of its voting stock for all of Theda Corporations single

class of stock owned entirely by Kyle. Kyles basis in his Theda stock was $400,000.

(1) Does this exchange satisfy the requirements for a Type B reorganization?

In your answer, discuss the requirements for a Type B reorganization and whether

they are satisfied in this case.

(2) What gain, if any, do Aurora and Kyle recognize on the exchange?

(3) What is Kyles basis in his Aurora stock? What is Auroras basis in its Theda stock?

Part 6 (14 pts.)

Carlys gross estate includes 1,500 shares of stock of Macon Corporation (basis to Carly of

$1,200,000, fair market value on date of death of $8,250,000). The estate will incur $5,500,000

in death taxes and funeral and administration expenses, and the adjusted gross estate is

$22,000,000. Joni, Carlys daughter and sole heir of her estate, owns the remaining 500 shares

of Macon Corporations shares outstanding. In the current year, Macon (E&P of $10,000,000)

redeems all the estates 1,500 shares for $8,250,000.

(1) Does Macons redemption of the estates stock qualify as a redemption to pay death

taxes under 303? Explain and show supporting computations.

(2) How much of the redemption

qualifies under 303?

(3) Can the rest of the proceeds be treated as received from the sale of stock under one of

the other qualifying redemptions (not essentially equivalent to a dividend, substantially

disproportionate, or complete termination)? Explain why or why not and show

computations to support your answer.

(4) Without prejudice to your answer in Part (3), assume that the rest of the proceeds

cannot be treated as a sale of the stock under one of the other qualifying redemptions.

What are the amounts and character of the income the estate must recognize?

Part 7 (6 pts.)

Rogers Corporation acquired land in a 351 exchange in November 2017. The land had a

basis of $500,000 and a fair market value of $550,000 on the date of the transfer. Rogers

Corporation has two equal shareholders (i.e., each owns 50%), Chris and Mindy, who are father

and daughter. Rogers adopts a plan of liquidation in March 2019. At the time the plan was

adopted, the land had decreased in value to $400,000.

Required: Determine the dollar amount of loss that Rogers Corporation may recognize in

each of the independent situations below.

(a) Rogers Corporation distributes the land pro rata to Chris and Mindy.

b) Rogers Corporation sells the land for $400,000 and distributes the proceeds to Chris and

Mindy.

(c) Assume the same facts as stated above, except that the land had a basis of $500,000

and a fair market value of $450,000 in November 2017 when it was acquired in the

351 transaction. If Rogers Corporation were to sell the land and distribute the

proceeds to Chris and Mindy, what amount of loss may Rogers recognize?

Part 8 (8 pts.)

Acquiring Corporation transfers $500,000 stock and land with a value of $400,000 (basis of

$250,000) to Target for most of its assets. The assets Target does not transfer to Acquiring in

the Type A reorganization are distributed to Targets shareholder, Tia. They are valued at

$100,000 (basis of $120,000). Acquiring stock and the land also are distributed to Tia in

exchange for her stock in Target. Tias basis in her Target stock is $650,000.

Required: Show supporting computations for all answers to the following questions.

1. What amount of gain or loss is recognized by Acquiring Corporation?

2. What amount of gain or loss is recognized by Target Corporation?

3. What amount of gain or loss is recognized by Tia?

4. What is Tias basis in the Acquiring stock she receives?