60. Jakub and Sylvia propose to have their corporation, Wolverine Universal (WU), acquire another corporation, EMU Inc., in a tax-deferred triangular merger using an acquisition subsidiary of WU. The sole shareholder of EMU, Edie Eagle, will receive $250,000 plus $150,000 of WU voting stock in the transaction. a) Can the transaction be structured as a forward triangular merger? Explain why or why not. b) Can the transaction be structured as a reverse triangular merger? Explain why or why not.
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- JH Inc. has the assets with FMV of $100M and liabilities of $10M. Sunny plans to acquire JH’s assets but want to be a tax-deferred transaction. If the state merger statute does not allow this, how can she accomplish the acquisition? Briefly describe.Q.98. Smith and Jones create SJ Corporation. Smith contributes property with a fair market value of $80,000, and Jones contributes cash of $70,000. Each receives a 50% share in the corporation, and the corporation is valued at $140,000 immediately after the formation. Smith's property has an adjusted basis of $25,000, and is subject to a $10,000 mortgage, which is assumed by the company. What gain will Smith recognize in this situation? A. $0 B. $10,000 C. $15,000 D. $25,0005. (a) A transfers a contract to perform services to Newco in exchange for 50% of Newco's stock. B transfers a tract of land with a basis of 50 and FMV of 100 in exchange for 50% of Newco's stock. What are the tax consequences to all of the parties? (b) Suppose that in addition to transferring the services contract, A transfers cash of 20. A still receives 50% of the stock. How would this change your answer?
- BMW Motors Corp. wants to acquire all the assets of MWB Corp. BMW plans to pay for the assets by issuing its own corporate stock. BMW’s board of directors has already approved the merger. In what circumstances would the approval of BMX’s shareholders be required for this merger?Is the approval of MWB’s shareholders necessary? Explain.Which of the following scenarios will qualify under Section 351 as a nontaxable corporate formation? For those that do not qualify, what requirements of Section 351 do they violate? Ginger, Mary Ann, and Mrs. Howell form GMH Corp. Ginger contributes tax memorabilia in exchange for 40% of GMH’s stock. Mary Ann contributes farmland in exchange for 30% of GMH, and Mrs. Howell contributes cash in exchange for the remaining 30%. Clyde founded ABC Corp. in 2009 and owns all of ABC’s 1,000 shares of outstanding stock. In 2013, ABC issues 300 shares of new stock to Bonnie in exchange for land that Bonnie owned. Will Bonnie’s contribution qualify under Section 351? With the same facts as in scenario b, now ABC issues 4,500 shares of new stock to Bonnie in exchange for Bonnie’s land. Bert and Ernie form Duckie Corp. in late 2013. Bert contributes $10,000 cash in exchange for 60% of Duckie’s stock; Ernie contributes services in exchange for the remaining 40% of Duckie.5. (a) A transfers a contract to perform services to Newco in exchange for 50% of Newco's stock. B transfers a tract of land with a basis of 50 and FMV of 100 in exchange for 50% of Newco's stock. What are the tax consequences to all of the parties? (b) Suppose that in addition to transferring the services contract, A transfers cash of 20. A still receives 5096 of the stock. How would this change your answer? () Suppose instead that in addition to transferring the services contract, A transfers cash of just 1 How would this change your answer?
- c. What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger? d. What is Ernesto’s tax basis in the STS stock he receives in the exchange?Craig owns a piece of land that he'd like to use in a new business. He will transfer the land into a newly formed corporation using Section 85. The land has an ACB of $2,000 and a FMV of $11,000. If he takes back a note payable equal to $5,000 on the exchange, and the remaining consideration as shares of the corporation, which of these options includes at least part of the tax consequences? OThe shares will have an ACB of $0 and a FMV of $11,000 $3,000 capital gain will result $3,000 deemed dividend OThe shares will have an ACB of $2,000 and a FMV of $8,000Smith and Jones create SJ Corporation. Smith contributes property with a fair market value of $80,000, and Jones contributes cash of $70,000. Each receives a 50% share in the corporation, and the corporation is valued at $140,000 immediately after the formation. Smith's property has an adjusted basis of $25,000, and is subject to a $10,000 mortgage, which is assumed by the company. What gain will Smith recognize in this situation? A. $0 B. $10,000 C. $15,000 D. $25,000 2. Kookaburra Corp. reports net income per books of $575,000 for the current tax year. Included in this amount are the following items: Accrued vacation expense paid 4 months after year end $50,000 Estimated warranty expense (actual claims paid were $8,000) 10,000 Depreciation expense 35,000 Meals purchased at restaurants 30,000 Kookaburra's depreciation expense for tax purposes is $40,000. What is the company's taxable income for the current tax year? A. $572,000 B.…
- 9. Darrel exchanged his stocks in Queen Corporation for the stocks of Queendom Corporation pursuant to a plan of merger between Queen and Queendom. Darrel acquired his stocks for P100,000 when its fair value was P105,000. The shares of Queen and Queendom have fair values of P120,000, and P110,000, respectively on the date of exchange. istiqe 190 pd ei jedw What is the tax basis of the Queendom shares received and the gain to be recognized in the exchange? 000,0 000.1E a. P120,000; P20,000 d c. P105,000; P 0 b. P 110,000; P20,000 d. P100,000; P 0 sisab s ton asgas68 M2Check my answer. Adam transfers property with an adjusted basis of $50,000 (fair market value of $400,000) to Swift Corporation for 90% of the stock. The property is subject to a liability of $60,000, which Swift assumes. What is the basis of the Swift stock to Adam? Section 357 provides when the acquiring corporation a liability is a section 351 transaction, the liability is not treated as a boot received for gain purposes, but is used in determining the basis of the stock received. The basis of the property transferred is $50,000, Liability assumed is $60,000. The basis of the stock received is $0.0 What is the basis of the property to Swift Corporation? The basis of the property received by the corporation is greater than the adjusted basis or the debt assumed. Swifts basis in the property is $60,000Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership. Rondo and Larry would each invest $150,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $150,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $50,000 from the bank. If applicable, this debt will be shared equally between the two owners. a. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation? b. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation? c. After taking the loan into account, what is Rondo's tax basis in his R&L ownership interest if R&L is formed as an LLC and taxed as a partnership?