Identify Which of the Following Statements Is True

question 81

Multiple Choice

Identify which of the following statements is true.

• A)The target corporation in a tax-free reorganization generally recognizes no gain or loss when boot property is received in exchange for assets because such property is usually distributed to its shareholders and creditors when the target corporation is liquidated.
• B)In tax-free reorganizations, one transaction cannot qualify for more than one type of tax-free reorganization.
• C)The Sec. 1245 recapture rules override the nonrecognition of gain or loss rules for an asset-for-stock tax-free reorganization.
• D)All of the above are false.

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Definitions:

Trading Investments

Assets that a company holds primarily for the purpose of selling them in the near term to generate income.

Subsidiary Company

A company that is controlled by another company, known as the parent company, through majority ownership or significant influence.

Investee Company

A company in which an investor holds a significant interest but not controlling stake.

GAAP

A set of widely adhered to accounting norms and standards that guide financial reporting, known as Generally Accepted Accounting Principles.