Spoonbill Corporation Has Assets with a FMV of $800,000 and Adjusted

question 70

Multiple Choice

Spoonbill Corporation has assets with a FMV of $800,000 and adjusted basis of $600,000. It has been manufacturing engineering equipment and laboratory tools for the last eight years. Spoonbill forms a new corporation, Roseate Corporation, by acquiring all of its stock in exchange for the laboratory tool division of Spoonbill. Each of the Spoonbill shareholders receives 1 share of Roseate stock for each 50 shares they own in Spoonbill. How will this transaction be treated for Federal income tax purposes?

• A) As a split-off "Type D" reorganization.
• B) As a spin-off "Type D" reorganization.
• C) As a spit-up "Type D" reorganization.
• D) This transaction is treated as a stock dividend.

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Definitions:

Finishing Department

A section within a manufacturing operation where products undergo final processing, treatments, or coatings before being ready for sale.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, based on a selected activity base, before the actual costs are known.

Machine-Hours

A measure of the amount of time a machine is operated, often used in costing and budgeting processes.

Forming Department

A production department specialized in shaping and assembling parts or materials into finished goods.