QUESTION 23

1. J owns all the stock of T. Ts only asset is a thoroughbred racing track with an adjusted basis of $1,200,000 and a fair market value of $3,000,000. Js basis in the T stock is $1,000,000. P, a corporate developer of shopping malls wants to acquire the race track for a mall site. P and J agree on a Type C reorganization, with T trading the race track for P stock worth $2,580,000 and $20,000 in cash and then liquidating. P will give T some treasury shares P bought in the market for $2,000,000. Assume this will qualify as a good Type C reorganization to which T and P are parties to a reorganization.

   	a.	P recognizes gain on the transfer of the treasury stock because of Section 1032.
   	b.	P takes a transferred basis from T of $1,200,000 plus $20,000 gain recognized under Section 362.
   	c.	P takes a transferred basis from T of $1,200,000 under Section 362.
   	d.	A and B.
   	e.	A and C.

QUESTION 24

1. J owns all the stock of T. Ts only asset is a thoroughbred racing track with an adjusted basis of $1,200,000 and a fair market value of $3,000,000. Js basis in the T stock is $1,000,000. P, a corporate developer of shopping malls wants to acquire the race track for a mall site. P and J agree on a Type C reorganization, with T trading the race track for P stock worth $2,580,000 and $20,000 in cash and then liquidating. P will give T some treasury shares P bought in the market for $2,000,000. Assume this will qualify as a good Type C reorganization to which T and P are parties to a reorganization.

   Same facts as above, except J incorporated the race track just prior to doing the deal with P. J used Section 351 to incorporate the track. Also, J and P decide to do a Type B stock for stock reorganization rather than a Type C reorganization as in Question 20.

   	a.	This is a good Section 351 followed by a good Type B reorganization so that J can avoid tax. The taxpayer is free to arrange transactions to minimize tax.
   	b.	The IRS might well argue that the two transactions are too closely related under the step transaction doctrine and treat the transaction as if J had sold the assets to P which would have happened if J had not incorporated shortly before the Type B reorganization.
   	c.	Neither of the above.