Under what conditions is it advantageous for a shareholder


1.True or False?  A corporation’s assumption of shareholder liabilities will always constitute boot in a §351 transaction.  Explain.

2. How does the tax treatment differ in cases where liabilities are assumed with a tax avoidance purpose versus where liabilities assumed exceed basis?  When would this distinction cause  a difference in the tax treatment of the transactions?

3.What is a carryover basis as it relates to property received by a corporation in a §351 transaction?  What is the purpose of attaching a carryover basis to property received in a §351 transaction?

4.Under what circumstances does property received by a corporation in a §351 transaction not receive a carryover basis?  What is the reason for this rule?

5.How does a corporation depreciate an asset received in a §351 transaction in which no gain or loss is recognized by the transferor of the property?

6.True or False?  A shareholder receives the same tax consequences whether property is contributed to a corporation in a §351 transaction or as a capital contribution.  Explain.

7.Why might a corporation prefer to characterize an instrument as debt rather than equity for tax purposes?  Are the holders of the instrument indifferent as to its characterization for tax purposes?

8.Under what conditions is it advantageous for a shareholder to hold §1244 stock?  Why did Congress bestow these tax benefits on holders of such stock?

9.Why does the acquiring corporation usually prefer to buy the target corporation’s assets directly in an acquisition?

10.Why do the shareholders of the target corporation usually prefer to sell the stock of the target corporation to the acquiring corporation?

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Finance Basics: Under what conditions is it advantageous for a shareholder
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