Identify Which of the Following Statements Is True

question 80

Multiple Choice

Identify which of the following statements is true.

• A)Able Corporation (New York)transfers its assets to Able Corporation (Delaware)in exchange for all of its stock. Able Corporation (New York)is liquidated. This exchange is a Type F reorganization.
• B)Strict adherence to legislative guidelines with regard to reorganizations is sufficient for tax-free treatment.
• C)A suitable business purpose for a tax-free reorganization is to permit the minimization of shareholder taxes.
• D)All of the above are false.

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Definitions:

Class Asset

Categories of assets grouped together based on having similar financial characteristics, often used in finance for valuation and risk assessment.

Like-kind Treatment

A tax deferral for exchanges of business or investment properties of similar nature, per Internal Revenue Code Section 1031.

Involuntary Conversion

A loss or destruction of property that is unexpected and not initiated by the property owner, which can have tax implications for gains received from insurance or other compensation.

Qualifying Replacement Property

Property that is acquired to replace a property involved in an involuntary conversion, and meets certain criteria to defer recognition of gain for tax purposes.