Unit 10: Tax Planning for Restructuring of Business-II - Practice Quiz

1 What is an amalgamation in the context of corporate restructuring?

2 In an amalgamation, the company whose undertaking is transferred is commonly called the:

3 The company into which the amalgamating company merges is known as the:

4 For a tax-neutral amalgamation, the assets of the amalgamating company are generally transferred to the:

5 In a qualifying amalgamation, shareholders of the amalgamating company generally receive:

6 One common tax planning benefit of a qualifying amalgamation is:

7 An amalgamation normally results in the transfer of the undertaking along with its:

8 What is a de-merger?

9 The company that transfers an undertaking in a de-merger is called the:

10 The company receiving the undertaking in a de-merger is known as the:

11 In a tax-neutral de-merger, consideration is generally discharged by issuing shares of the:

12 A de-merger is commonly used to achieve which business objective?

13 For a de-merger to receive tax benefits, the transferred undertaking should generally be transferred as a:

14 A de-merger usually transfers which of the following from the demerged company?

15 What is a slump sale?

16 In a slump sale, consideration is generally paid as:

17 In a slump sale, separate values are generally not assigned to:

18 A slump sale is treated primarily as a transfer of:

19 Which document commonly reports the computation of net worth for a slump sale?

20 The capital gain from a slump sale is generally calculated using the undertaking's:

21 Alpha Ltd. merges into Beta Ltd. All assets and liabilities of Alpha Ltd. become those of Beta Ltd. Shareholders holding 70% in value of Alpha Ltd.'s shares become shareholders of Beta Ltd. Which condition for qualifying as an amalgamation under the Income-tax Act is not satisfied?

22 An Indian company transfers a capital asset to a foreign amalgamated company under a qualifying amalgamation. Can the transfer claim the capital-gains exemption generally available to an amalgamating company?

23 Ravi acquired shares of X Ltd. for . In a tax-neutral amalgamation, he receives shares of Y Ltd. in exchange. What is the cost of acquisition of the Y Ltd. shares for computing a future capital gain?

24 Meera held shares of P Ltd. for 28 months before receiving shares of Q Ltd. under a qualifying amalgamation. She sells the Q Ltd. shares 10 months later. How is the prior holding period generally treated?

25 M Ltd. incurs wholly and exclusively for a qualifying amalgamation. Assuming Section 35DD applies, what deduction is generally available each year?

26 A qualifying amalgamating company has an eligible accumulated business loss of lakh and unabsorbed depreciation of lakh. Subject to Section 72A conditions, what amount may become available to the amalgamated company?

27 Under an amalgamation, shareholders of the amalgamating company receive only shares of the Indian amalgamated company. Which is the most appropriate tax treatment of the exchange, assuming all statutory conditions are met?

28 A company transfers selected profitable assets of a division to another company but retains the division's related liabilities. Why is the transaction unlikely to qualify as a demerger?

29 D Ltd. transfers an undertaking to R Ltd., but R Ltd. does not issue shares to D Ltd.'s shareholders. No statutory exception applies. Which requirement of a qualifying demerger is not met?

30 A shareholder's original shares in a demerged company cost . The net book value of assets transferred is lakh, while the net worth of the demerged company immediately before demerger is lakh. What cost is allocated to shares of the resulting company?

31 Using the same facts, where the original shares cost and is allocated to the resulting-company shares, what is the revised cost of the original shares?

32 An accumulated business loss is directly attributable to an undertaking transferred in a qualifying demerger. To which company is the loss generally assigned after the demerger?

33 A common business loss of lakh cannot be directly attributed to any undertaking. Assets worth lakh are transferred in a demerger, and total assets before demerger were lakh. What loss is generally allocated to the resulting company?

34 A division is transferred under a scheme, but the resulting company immediately closes it and acquires only isolated assets rather than an operating business. Which condition is most directly in doubt?

35 A company sells an entire undertaking for a single lump-sum price without assigning separate values to its assets and liabilities. How is the transaction generally classified?

36 Separate values are stated for land and buildings in a slump-sale document solely for determining stamp duty. What is the usual effect on the transaction's classification?

37 For a slump sale, an undertaking has depreciable assets with tax written-down value of lakh, non-depreciable assets with book value of lakh, and liabilities of lakh. What is its net worth for Section 50B purposes?

38 An undertaking is sold for a deemed full value of consideration of lakh, and its net worth under Section 50B is lakh. What is the capital gain?

39 An undertaking has been held for 30 months before being transferred through a slump sale. How is the resulting capital gain generally classified?

40 In a slump sale, the stated sale consideration is crore, FMV1 is crore, and FMV2 is crore under the prescribed valuation rules. What amount is generally deemed to be the full value of consideration?

41 A transferee company already holds shares worth lakh in the transferor company, while its subsidiary holds shares worth lakh. The transferor's total issued shares are worth lakh. For the shareholder-continuity condition in the definition of amalgamation under section 2(1B), what minimum value of shares held by the remaining shareholders must be represented by persons who become shareholders of the transferee?

42 Company A transfers all but one immovable property to Company B under a court-approved merger. All A's liabilities vest in B, and the required shareholder continuity is satisfied. Which conclusion is correct under section 2(1B)?

43 An Indian amalgamating company transfers its capital assets to a foreign amalgamated company. The arrangement otherwise satisfies section 2(1B). Which statement best describes the exemption under section 47(vi)?

44 A shareholder exchanges shares of an amalgamating company for shares worth lakh in the Indian amalgamated company plus cash of lakh. Which is the most accurate treatment under section 47(vii)?

45 A qualifying amalgamation is tax-neutral under section 47. The amalgamating industrial company has accumulated business loss and unabsorbed depreciation, but the conditions prescribed under section 72A are not met. What follows?

46 Under a qualifying amalgamation, B Ltd. receives a capital asset that cost A Ltd. lakh. A Ltd. had held it for 30 months, and B Ltd. sells it after another 10 months. Ignoring indexation, which basis applies when B computes capital gain?

47 A Ltd. has carried on the loss-making eligible business for more than three years but, on the amalgamation date, does not satisfy the prescribed continuity threshold for fixed assets held during the preceding two years. The merger otherwise qualifies under section 2(1B). Which result is most appropriate?

48 A division's factory and employees are transferred to a resulting company, but trade creditors directly connected with that division remain with the demerged company. The resulting company issues proportionate shares to all shareholders. Does the arrangement satisfy section 2(19AA)?

49 Immediately before a demerger, the resulting company itself owns of the demerged company. It issues proportionate shares to all other shareholders but issues none to itself. How does this affect the definition in section 2(19AA)?

50 A demerged company following Indian Accounting Standards records transferred assets in the resulting company's books at values required by the applicable Ind AS rather than their old book values. Which conclusion is correct?

51 A shareholder's original cost of shares in a demerged company is lakh. The net book value of assets transferred is lakh, and the demerged company's net worth immediately before demerger is lakh. What cost is allocated to shares in the resulting company under section 49(2C)?

52 A demerged company has an unabsorbed business loss of crore that is not directly relatable to any undertaking. Assets of the transferred undertaking are crore, while total assets immediately before demerger are crore. How much loss is apportioned to the resulting company under section 72A(4)?

53 Of a demerged company's crore accumulated loss, crore is directly attributable to the transferred undertaking and crore is directly attributable to the retained undertaking. What amount moves to the resulting company under section 72A(4)?

54 An undertaking is transferred under an arrangement satisfying section 2(19AA), but the resulting company is incorporated outside India. Which statement is correct regarding section 47(vib)?

55 An undertaking is transferred for lakh. Its depreciable assets have tax written-down value of lakh. Other assets have book value of lakh, including a lakh upward revaluation. Liabilities are lakh. What is the undertaking's net worth under section 50B?

56 The contractual price for a slump sale is crore, its prescribed fair market value on the transfer date is crore, and the undertaking's net worth is crore. What capital gain is computed under section 50B?

57 The aggregate value of an undertaking's assets for section 50B is crore and the value of its liabilities is crore. Its deemed full value of consideration is crore. What is the taxable capital gain?

58 A business undertaking is transferred for a lump sum. Individual asset values are stated in the instrument solely to calculate stamp duty, but the parties do not negotiate asset-wise consideration. Does this allocation necessarily prevent slump-sale treatment?

59 A taxpayer transfers a five-year-old undertaking containing depreciable assets and inventory through a qualifying slump sale. Which characterization generally governs the gain under section 50B?

60 Company X transfers an undertaking to Company Y in exchange solely for listed shares of Y, without monetary consideration and without assigning asset-wise values. Under the expanded definition applicable to transfers by any means, which treatment is most accurate?