Reference no: EM13941154

1. Abacus, Inc. forms a corporation, Sirius, Inc., by transferring 18 percent of Abacus's stock to it for 100 percent of the stock in Sirius. Sirius, Inc. acquires 90 percent of the stock of Tyrol, Inc. for its stock in Abacus, whereupon Sirius is merged into Tyrol, the latter surviving. These transactions may best be described as:

a. A reverse triangular merger

b. A Section 351 transfer, followed by a Type B reorganization

c. A spin-off

d. The purchase of a subsidiary corporation

2. The Blues brothers each own 50 percent of the stock of Raiders, Inc. After a serious disagreement, they decide to divide the business in two. Raiders, Inc. therefore transfers half its assets to a new corporation, Doolittle, Inc., in exchange for its stock and the other half of its assets to another new corporation, Minimum, Inc., also in exchange for its stock. Both brothers turn in their shares in Raiders, with one brother receiving all of the stock in Doolittle, and the other brother receiving all of the stock in Minimum. Raiders' earnings and profits at the time were $1,000,000. This transaction can best be described as:

a. Spin-off

b. Tax-free split-up

c. Acquisitive Type D reorganization

d. Two Section 351 transactions

3. Ivory, Inc. acquires all the assets of Mammoth, Inc. If the consideration paid is as follows, which transaction qualifies as a Type C reorganization?

a. Nonvoting convertible preferred stock in Ivory worth $500,000 and cash of $500,000.

b. Voting common stock in Ivory worth $750,000, assumption of liabilities of Mammoth of $200,000, plus $50,000 in cash.

c. Voting convertible preferred stock in Ivory worth $550,000 and warrants worth $450,000 to purchase stock in Ivory's subsidiary.

d. Voting common stock in Ivory worth $200,000 and the assumption of $800,000 of Mammoth's liabilities.

The following statements are all true, except:

a. Since capital losses reduce earnings and profits even though they have to be carried back or forward, a carryback against capital gains in a prior year will increase the tax base.

b. Capital losses carried to a taxable year and offset against a net Section 1231 gain will increase accumulated taxable income only if it is a carryover, not if it is a carryback, since the latter would change the tax base retroactively.

c. Capital losses in excess of capital gains for a given year reduce accumulated taxable income for such year, even though the excess is carried forward in search of capital gain.

d. To arrive at accumulated taxable income, the excess of net long-term capital gains over net short-term capital losses, if any, less the tax attributable thereto, is subtracted.