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1. Legal dissolution
under state law is required for a liquidation to be complete for tax purposes.
a. True
b. False
.

2. One similarity
between the tax treatment accorded liquidating and nonliquidating distributions
is with respect to a shareholders basis in property received in such
distributions. For each type of distribution, the shareholders basis is the
propertys fair market value on the date of distribution.
a. True
b. False

3. As a general rule, a
liquidating corporation recognizes gains but not losses on the distribution of
property in complete liquidation.
a. True
b. False

4. Liquidation expenses incurred
by a corporation are generally deductible as 162 trade or business expenses.
a. True
b. False

5. The related-party
loss limitation applies to distributions to related parties and either the
distribution is pro rata or the property distributed is disqualified property.
a. True
b. False

6. The builtin loss
limitation in a complete liquidation does not apply to losses attributable to a
decline in a propertys
fair market value after its
transfer to the corporation.
a. True
b. False

7. The related-party loss
limitation in a complete liquidation applies only to distributions of property
while the built-in loss limitation can apply to a distribution or sale of
property.
a. True
b. False

8. Pursuant to a
liquidation, Coral Corporation distributes to Lucinda, a shareholder, land
(basis of $90,000, fair market value of $200,000). The land is subject to a
$75,000 liability. Lucinda will have a basis of $125,000 in the land.
a. True
b. False

9. A corporation
generally will recognize gain or loss on a liquidating distribution of
installment notes to its shareholders.
a. True
b. False

10.Section 332 can apply
to a parent-subsidiary liquidation even if the subsidiary corporation is
insolvent on the date of the liquidation.
a. True
b. False

.

11.If a liquidation qualifies
under 332, any minority shareholder will recognize gain or loss equal to the
difference between the fair market value of assets received and the basis of
the shareholders stock.
a. True
b. False

12.A subsidiary
corporation is liquidated at a time when it is indebted to its parent
corporation. The subsidiary corporation distributes property to the parent
corporation in satisfaction of the indebtedness. If the liquidation is governed
by 332, neither the subsidiary nor the parent recognize gain or loss on the
transfer of property in satisfaction of indebtedness.
a. True
b. False

13.Brown Corporation
purchased 85% of the stock of Green Corporation five years ago for $850,000. In
the current year, Brown Corporation liquidates Green Corporation and acquires
assets with a basis to Green Corporation of $700,000 (fair market value of $1.1
million). Brown Corporation will have a basis in the assets of $850,000, the
same as Browns basis in its Green stock.
a. True
b. False

14.Sparrow Corporation purchased
90% of the stock of Warbler Corporation eight years ago for $1 million. In the
current year, Sparrow liquidates Warbler and acquires assets with a basis to
Warbler of $850,000 (fair market value of $1.2 million). Sparrow will have a
basis in the assets of $850,000 (Warblers basis in the assets), and no
recognized gain or loss.
a. True
b. False

15.A subsidiary is
liquidated pursuant to 332. The parent has held 100% of the stock in the
subsidiary for the past ten years. The subsidiary has a net operating loss
carryover of $400,000. The net operating loss does not carry over to the
parent.
a. True
b. False

.

16.If a parent
corporation makes a 338 election, the subsidiary corporation is treated as a
new corporation as of the
day following the qualified
stock purchase date.
a. True
b. False

17.If a parent
corporation makes a 338 election, the subsidiary corporation recognizes gain
but not loss on the deemed
sale of its assets on the
qualified stock purchase date.
a. True
b. False

.

18.If a parent
corporation makes a 338 election, the subsidiary corporation must be
liquidated.
a. True
b. False

1. Legal dissolution
under state law is required for a liquidation to be complete for tax purposes.a. Trueb. False.2. One similarity
between the tax treatment accorded liquidating and nonliquidating distributions
is with respect to a shareholders basis in property received in such
distributions. For each type of distribution, the shareholders basis is the
propertys fair market value on the date of distribution.a. Trueb. False3. As a general rule, a
liquidating corporation recognizes gains but not losses on the distribution of
property in complete liquidation.a. Trueb. False4. Liquidation expenses incurred
by a corporation are generally deductible as 162 trade or business expenses.a. Trueb. False5. The related-party
loss limitation applies to distributions to related parties and either the
distribution is pro rata or the property distributed is disqualified property.a. Trueb. False6. The builtin loss
limitation in a complete liquidation does not apply to losses attributable to a
decline in a propertysfair market value after its
transfer to the corporation.a. Trueb. False7. The related-party loss
limitation in a complete liquidation applies only to distributions of property
while the built-in loss limitation can apply to a distribution or sale of
property.a. Trueb. False8. Pursuant to a
liquidation, Coral Corporation distributes to Lucinda, a shareholder, land
(basis of $90,000, fair market value of $200,000). The land is subject to a
$75,000 liability. Lucinda will have a basis of $125,000 in the land.a. Trueb. False9. A corporation
generally will recognize gain or loss on a liquidating distribution of
installment notes to its shareholders.a. Trueb. False10.Section 332 can apply
to a parent-subsidiary liquidation even if the subsidiary corporation is
insolvent on the date of the liquidation.a. Trueb. False.11.If a liquidation qualifies
under 332, any minority shareholder will recognize gain or loss equal to the
difference between the fair market value of assets received and the basis of
the shareholders stock.a. Trueb. False12.A subsidiary
corporation is liquidated at a time when it is indebted to its parent
corporation. The subsidiary corporation distributes property to the parent
corporation in satisfaction of the indebtedness. If the liquidation is governed
by 332, neither the subsidiary nor the parent recognize gain or loss on the
transfer of property in satisfaction of indebtedness.a. Trueb. False13.Brown Corporation
purchased 85% of the stock of Green Corporation five years ago for $850,000. In
the current year, Brown Corporation liquidates Green Corporation and acquires
assets with a basis to Green Corporation of $700,000 (fair market value of $1.1
million). Brown Corporation will have a basis in the assets of $850,000, the
same as Browns basis in its Green stock.a. Trueb. False14.Sparrow Corporation purchased
90% of the stock of Warbler Corporation eight years ago for $1 million. In the
current year, Sparrow liquidates Warbler and acquires assets with a basis to
Warbler of $850,000 (fair market value of $1.2 million). Sparrow will have a
basis in the assets of $850,000 (Warblers basis in the assets), and no
recognized gain or loss.a. Trueb. False15.A subsidiary is
liquidated pursuant to 332. The parent has held 100% of the stock in the
subsidiary for the past ten years. The subsidiary has a net operating loss
carryover of $400,000. The net operating loss does not carry over to the
parent.a. Trueb. False.16.If a parent
corporation makes a 338 election, the subsidiary corporation is treated as a
new corporation as of theday following the qualified
stock purchase date.a. Trueb. False
17.If a parent
corporation makes a 338 election, the subsidiary corporation recognizes gain
but not loss on the deemedsale of its assets on the
qualified stock purchase date.a. Trueb. False.18.If a parent
corporation makes a 338 election, the subsidiary corporation must be
liquidated.a. Trueb. False

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