Transactions may best be described

Assignment Help Financial Management
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.

Reference no: EM13941154

Questions Cloud

Compute the product margins : Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and the T500. Compute the product margins for the B300 and T500 under the company's traditional costing system
What is after-tax terminal value of facility and equipment : Assume you have just graduated from college with a degree in finance and you are trying to explain to your boss the importance of identifying and using the appropriate cash flows when you make financial decisions. Explain incremental cash flows to yo..
Computing interest tax savings : (Computing interest tax savings) Dharma Supply has earnings before interest and taxes (EBIT) of $556,000, interest expenses of $322,000 and faces a corporate tax rate of 36 percent. What is Dharma Supply's net income? What are the firm's interest tax..
Was petgo successful during its first month of operation : John Smith established an animal clinic (PetGo) on December 1, 2016, by purchasing all of its common stock for $125,000 (no par value). The same day PetGo paid $2,500 to an attorney who prepared its legal documents and filed incorporation documents (..
Transactions may best be described : 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 merge..
Quintessential firm that operates on human capital. : Bill Gates has said that Microsoft is the quintessential firm that operates on "human capital." He once said that if someone developed a better operational system, Microsoft would be out of business in 90 days. If indeed the software industry is driv..
Average return and standard deviation of returns for stock : Based on the following data, calculate the average return and standard deviation of returns for Stock X.
Common stock valuation : (Common stock valuation) gilliland motor inc, paid a $4.23 dividend last year. If Gilliand's retrun on equity is 35 percent, and its retention rate is 29 percent, what is the value of the common stock if the investors require a rate of return of retu..
Compute the MIRR statistic for Project : Compute the MIRR statistic for Project J if the appropriate cost of capital is 9 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Project J Time: 0 1 2 3 4 5 Cash flow –$1,400 $470 $1,680 –$560 $420 –$14..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is this bonds yield-to-call

Suppose that you have a bond that is currently trading for 1,234.56, has just paid its coupon, has a time-to-maturity of   14 years, has an annual coupon rate of 7.1%, and a face value of $1,000. This bond is unique in that the issuing firm has the r..

  Considering the risk around the cost point estimate

Considering the risk around the cost point estimate, what type of contract will generally be used for the contracted effort?

  Independent manufacturer that sells protective cases

You are the manager of an independent manufacturer that sells protective cases for the Samsung Galaxy. Samsung produces half of its phones at a plant near Hong Kong and the other half at a plant located near Shanghai.

  Investment outlay today-cost of capital for similar projects

GE has the following two projects that it is considering; it can choose only one. Project A has an investment outlay/expense today of $9.7M, and its cash flows over the next three years are $4.1M, $4.1M, and $4.9M. Project B has an outlay of $9.7M, a..

  Common stockholders have number of general rights

Common stockholders have a number of general rights, including all of the following except:

  Tax-free retirement annuity

The Financial Advisor is a weekly column in the local newspaper. Assume you must answer the following question. “I recently retired at age 65, and I have a tax-free retirement annuity coming due soon.  How does increasing the interest rate change you..

  Is this a discount or premium bond

Calculate the price of a 5.8 percent coupon bond with 10 years left to maturity and a market interest rate of 4.6 percent Par Value $1000.  Is this a discount or premium bond

  Concerning the generation-skipping transfer tax rules

All the following statements concerning the generation-skipping transfer tax rules are correct EXCEPT:

  What was the cash flow to stockholders for the year

The December 31, 2013, balance sheet of Schism, Inc., showed $153,000 in the common stock account and $2,780,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed $163,000 and $3,080,000 in the same two accounts, ..

  Rise for the option strategy to be more profitable

The current price of a stock is $94, and three-month European call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2..

  Portfolio weighted average of the returns of assets

You own a portfolio that has $2,100 invested in Stock A and $3,050 invested in Stock B. If the expected returns on these stocks are 10 percent and 14 percent, respectively, what is the expected return on the portfolio? (Do not round your intermediate..

  General matters outstanding bond issue has coupon rate

General Matter’s outstanding bond issue has a coupon rate of 10.8%, and it sells at a yield to maturity of 8.75%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at fac..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd