13) In a complete liquidation of a corporation, which of the following is false?
A) All stock of the liquidating corporation is canceled or redeemed.
B) The corporation ceases to be a going concern.
C) The corporation divests itself of substantially all its properties.
D) The liquidation of a corporation means it has undergone dissolution.
14) Identify which of the following statements is false.
A) The tax attributes of the liquidating corporation carry over to the shareholders when the liquidation is conducted under the general liquidation rules.
B) Baker Corporation was formed in a Sec. 351 exchange three years ago by Emil, Fred, and George who own equal stock interests. The corporation can be liquidated tax-free under the special liquidation rules of Secs. 332 and 337.
C) The terms “liquidation” and “dissolution” are synonymous.
D) All of the above are false.
15) When a corporation liquidates, it performs three activities. What is the general order of these activities in a plan of liquidation?
A) pay debts, distribute property to shareholders, and wind up its affairs
B) wind up its affairs, distribute property to shareholders, pay debts
C) pay debts, wind up its affairs, and distribute property to shareholders
D) wind up its affairs, pay debts, and distribute property to shareholders
16) Moya Corporation adopted a plan of liquidation last year. All but a nominal amount of Moya’s assets are distributed to its shareholders within the year. Which of the following statements is not true?
A) The liquidation of Moya Corporation means the corporation has undergone dissolution.
B) Moya Corporation retains its state charter.
C) Moya Corporation’s existence is preserved.
D) Moya Corporation has been liquidated for tax purposes.
17) Liquidation rules generally are applied the same to the following organizations except for
A) subsidiary corporations (80% controlled).
B) C corporations.
C) S corporations.
D) subsidiary corporations (less than 80% controlled).
18) Riverwalk Corporation is liquidated, with Juan receiving $5,000 in money and other property having a $6,000 FMV. Juan’s basis in his Riverwalk stock is $8,000. Upon liquidation, Juan must recognize a gain of
A) 0.
B) $2,000.
C) $3,000.
D) $11,000.
19) Riverwalk Corporation is liquidated, with Juan receiving $5,000 in money, other property having a $6,000 FMV, and a $1,000 mortgage on the property. Juan’s basis in his River walk stock is $8,000. Upon liquidation, Juan must recognize a gain of
A) 0.
B) $2,000.
C) $3,000.
D) $11,000.
20) Texas Corporation is undergoing a complete liquidation and distributes land to Robert, one of its shareholders, in exchange for all of Robert’s stock. The land has a basis of $300,000 and an FMV of $400,000 on Texas Corporation’s books and is subject to a $325,000 liability. Robert assumes the liability on the property. Robert’s basis in his Texas Corporation stock is $100,000. What is the amount of gain or loss recognized by Robert on the distribution?
A) $175,000 gain
B) $25,000 gain
C) No gain or loss is recognized.
D) $25,000 loss
21) Robot Corporation is liquidated, with Marty receiving property having an adjusted basis of $60,000 and an FMV of $90,000. The property is subject to a $80,000 mortgage, which Marty assumes. Marty’s basis in the Robot stock surrendered is $50,000. Marty must recognize
A) a $40,000 loss.
B) no gain or loss.
C) a $60,000 gain.
D) none of the above
22) Identify which of the following statements is true.
A) The method of accounting used by shareholders involved in a complete liquidation is relevant when determining the year in which the shareholder’s gain or loss should be reported.
B) An accrual method of accounting taxpayer recognizes his/her realized gain on a corporate liquidation when there has been actual or constructive receipt of the liquidating distribution(s).
C) If a shareholder assumes or acquires liabilities of the liquidating corporation, the amount of these liabilities does not reduce the amount realized by the shareholder.
D) All of the above are false.
