When Gain Is Realized by a Target Corporation from Disposing

question 19

Multiple Choice

When gain is realized by a target corporation from disposing of its assets in a tax-free reorganization, the gain is

• A)recognized if boot is received and immediately distributed to its shareholders.
• B)recognized without exception.
• C)recognized if boot is received and retained.
• D)never recognized.

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Definitions:

Taxable Income

The amount of an individual's income that is subject to taxation, after all deductions and exemptions.

Domestic Corporations

Companies that are incorporated and operate within the country of their incorporation, subject to its laws and taxation.

Earnings and Profits

A tax term referring to the net income of a company with adjustments for certain tax-related items; crucial for determining how distributions to shareholders are taxed.

FMV

Fair Market Value; the estimated price at which an asset would trade in a competitive auction setting.