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Test Bank for South-Western Federal
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Partnerships, Estates and Trusts, 44th
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Young, Annette Nellen, William H.
Hoffman Jr. David M. Maloney
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Test Bank for South-Western Federal Taxation 2021:

Corporations, Partnerships, Estates and Trusts, 44th
Edition, William A. Raabe, James C. Young, Annette
Nellen, William H. Hoffman, Jr., David M. Maloney
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Solution Manual for South-Western Federal Taxation

2021: Corporations, Partnerships, Estates and Trusts,
44th Edition, William A. Raabe, James C. Young, Annette
Nellen, William H. Hoffman, Jr., David M. Maloney
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2021: Corporations, Partnerships, Estates and Trusts,
44th Edition, William A. Raabe, James C. Young, Annette
Nellen, William H. Hoffman Jr. David M. Maloney
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Individual Income Taxes, 44th Edition, James C. Young,
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Jr. David M. Maloney
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2021: Individual Income Taxes, 44th Edition, James C.
Young, Annette Nellen, William A. Raabe, William H.
Hoffman Jr. David M. Maloney
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2021: Individual Income Taxes, 44th Edition, James C.
Young, Annette Nellen, William A. Raabe, William H.
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2021: Comprehensive, 44th Edition, David M. Maloney,
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Test Bank For South-Western Federal Taxation 2014:

Corporations, Partnerships, Estates & Trusts 37th
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James E. Smith David M. Maloney James C. Young
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Test Bank For South-Western Federal Taxation 2014:

Corporations, Partnerships, Estates & Trusts 37th
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James E. Smith, David M. Maloney, James C. Young
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Test Bank for South-Western Federal Taxation 2021: Corporations, Partnerships, Estates and T

Corporations, Partnerships, Estates and Trusts, 44th
Edition, William A. Raabe, James C. Young, Annette
Nellen, William H. Hoffman Jr. David M. Maloney
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Name: Class: Date:
chapter 7
Indicate whether the statement is true or false.
1. The continuity of business enterprise doctrine requires that at least 40% of the target’s assets are acquired with stock.
a. True
b. False
2. While a “Type B” reorganization requires that voting stock be used by the acquiring corporation, in a “Type A,” the
acquiring corporation can use common or preferred stock and still have the restructuring meet the qualifications of § 368.
a. True
b. False
3. In a divisive “Type D” reorganization, the distributing corporation obtains control of the new target by exchanging
some of its assets for at least 80% of the new target’s outstanding stock.
a. True
b. False
4. For a corporate restructuring to qualify as a tax-free reorganization, the step transaction doctrine must apply.
a. True
b. False
5. The Federal income tax treatment of a corporate restructuring is an extension of allowing entities to form without
taxation.
a. True
b. False
6. To qualify as a “Type A” reorganization, mergers must comply with the requirements of pertinent foreign, state, and
Federal statutes.
a. True
b. False
7. The acquiring corporation in a “Type G” reorganization reduces the tax attributes carried over from the bankrupt
corporation by the percentage in change in ownership.
a. True
b. False
8. Without evidence to the contrary, the IRS views transactions occurring within one year of a reorganization as part of
the restructuring under the step transaction doctrine.
a. True
b. False
9. An exchange of common stock for preferred stock or bonds for preferred stock can qualify as a “Type E”
reorganization.
a. True
b. False
10. Individual shareholders would prefer to have a gain on a corporate reorganization treated as a capital gain rather than
as a dividend, because they can reduce the amount taxable by their basis in the stock involved.
Copyright Cengage Learning. Powered by Cognero. Page 1
Name: Class: Date:
chapter 7
a. True
b. False
11. When a “Type F” reorganization includes a change from a taxable corporation to a flow-through entity, the original
corporation stock loses its § 1244 status and earnings and profits do not carry over.
a. True
b. False
12. In corporate reorganizations, if an acquiring corporation is using property other than stock as consideration, it may
recognize gains but not losses on the transaction.
a. True
b. False
13. The “Type B” reorganization requires a continuity of business interest. Therefore, the acquiring corporation must
obtain at least 40% of the target corporation’s stock through the reorganization.
a. True
b. False
14. Since debt holders do not own stock, they do not fall under the corporate reorganization rules.
a. True
b. False
15. In a “Type A” merger, the acquiring corporation may select which liabilities of the target it assumes, but in a “Type
A” consolidation, all the liabilities (known and contingent) must be assumed by the new corporation.
a. True
b. False
16. One advantage of acquiring a corporation with losses is that after a tax-free reorganization, the remaining corporation
may combine the negative earnings and profits (E & P) of the target corporation with positive E & P of the acquiring
corporation.
a. True
b. False
17. Liabilities generally are not considered boot in corporate reorganizations except in a “Type C” when cash or other
property is received by the target in the transaction.
a. True
b. False
18. A tax avoidance motive is essential in establishing a sound business purpose for a reorganization.
a. True
b. False
19. The tax treatment of reorganizations almost parallels the Federal income tax treatment for like-kind exchanges.
a. True
b. False
20. When a corporation has cancellation-of-debt relief in a “Type G” reorganization, the corporation reduces its benefits
Name: Class: Date:
chapter 7
in tax items such as earnings and profits.
a. True
b. False
21. Obtaining a favorable letter ruling from the IRS can ensure the desired tax treatment for parties contemplating a
corporate reorganization.
a. True
b. False
22. In a year in which an ownership change occurs for a corporation, the NOL carryforward is limited not only by the §
382 annual limitation but also by the percentage of the year remaining.
a. True
b. False
23. The gains that shareholders recognize as a part of a corporate reorganization may be treated a dividend to the extent of
the corporation’s E & P.
a. True
b. False
24. For corporate restructurings, meeting the § 368 reorganization “Type” requirements is all that needs to be considered
when planning the structure of the transaction.
a. True
b. False
25. If the acquiring corporation purchased 25% of target stock for cash 10 years ago, the acquiring corporation still
can meet the “Type C” reorganization requirement that 80% of the target’s assets be acquired with stock.
a. True
b. False
26. Target shareholders recognize gain or loss when they receive assets (boot) as well as stock in the acquiring
corporation in a transaction meeting the § 368 requirements.
a. True
b. False
27. The basis for the acquiring corporation in the target’s assets is increased by any gain recognized by the target.
a. True
b. False
28. When substantially all the assets of the target corporation are received in exchange for voting stock and selected
liabilities, the restructuring can qualify as a “Type C” reorganization.
a. True
b. False
29. When the § 382 limitation is evoked, the acquiring corporation is limited in its use of the tax loss carryover of the loss
corporation. The limitation is based on the net present value of the loss corporation using the Federal long-term discount
rate.
a. True
Name: Class: Date:
chapter 7
b. False
30. For a capital restructuring to qualify as a “Type E,” there must be at least a 50% change in the common stock
ownership.
a. True
b. False
31. The amount of gain recognized by a shareholder in a corporate reorganization is based on the shareholder’s
proportionate share of E & P.
a. True
b. False
32. The continuity of interest doctrine requires that all target shareholders receive some acquiring stock.
a. True
b. False
33. When applying the § 382 limitation to deductible losses, the § 382 limit first is applied to capital loss carryovers and
then to NOLs.
a. True
b. False
34. In a “Type B” reorganization, the acquiring corporation obtains control by exchanging common and preferred stock in
the same percentages as the target’s outstanding common and preferred stock.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
35. Crested Serpent Eagle (CSE) Corporation is owned by Lin Yuan and Yu Chi. It has been in the manufacturing and
lumber businesses for 20 years. For liability protection, the manufacturing assets of CSE are transferred to Serpent
Corporation for all its stock. This stock is distributed to Lin Yuan in exchange for her CSE stock. The lumber assets are
transferred to Eagle Corporation for all of its stock. Yu Chi receives the Eagle stock in exchange for his CSE shares. CSE
then terminates.
a. The transaction qualifies as a spin-off “Type D” reorganization.
b. The transaction qualifies as a split-off “Type D” reorganization.
c. The transaction qualifies as a split-up “Type D” reorganization.
d. The transaction is taxable.
36. 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 split-up “Type D” reorganization.
d. This transaction is treated as a stock dividend.
Name: Class: Date:
chapter 7
37. WhydahCo is owned by Gilda and her four nieces and nephews. Gilda owns all the WhydahCo voting stock and its
$50,000 bond. She wants to relinquish control of the entity; accordingly, WhydahCo redeems all of Gilda’s voting
common stock and issues its preferred stock to her. She also exchanges her bond for preferred stock. The nonvoting
preferred shares owned by the nieces and nephew are exchanged for voting common stock. Which of the following
statements is correct?
a. The exchange of a bond for preferred stock is taxable.
b. The exchange of common for preferred is not taxable but the exchange of preferred stock for common stock is
taxable.
c. All of these transactions are taxable.
d. The transaction is not currently taxable; this is a “Type E” reorganization.
38. Against the will of Rally Corporation’s management, Buoy Corporation offers Rally’s shareholders 2 shares of Buoy
common stock for each share of Rally common and 50 shares of Buoy common for each share of Rally preferred. The
results of a hostile takeover yield Buoy 85% of Rally common stock and 100% of the preferred. The only stock it did not
obtain was that owned by management. This transaction qualifies as a(n):
a. “Type A” consolidation.
b. “Type B” reorganization.
c. “Type D” split-up reorganization.
d. Taxable event.
39. Long Corporation has $500,000 of assets with a basis of $350,000 and liabilities of $125,000. ShortCo acquires
Long’s assets and $100,000 of liabilities by exchanging $400,000 of its voting stock. Long distributes the ShortCo stock
and remaining liabilities to its shareholder in exchange for the shareholder's Long stock with a basis of $275,000 and then
it liquidates. Which, if any, of the following statements is correct?
a. This restructuring qualifies as a “Type A” reorganization with no recognized gains or losses.
b. This restructuring qualifies as a “Type C” reorganization with no recognized gains or losses.
c. This qualifies as either a “Type A” or “Type C” and the shareholder has a $25,000 recognized gain.
d. The restructuring is taxable because liabilities cannot be distributed to shareholders in a tax-free
reorganization.
40. Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock
valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis
$900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this
transaction on her tax return?
a. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
b. Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.
c. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
d. None of these.
41. A tax-free corporate reorganization can be utilized to:

a. Transfer assets in a bankruptcy.
b. Resolve management issues by dividing a company into three new companies.
c. Combine four corporations into one.
d. Create a subsidiary.
e. All the above results are possible.

Name: Class: Date:
chapter 7
42. Acquiring Corporation transfers $1 million of its voting common stock and $100,000 cash to Target Corporation in
exchange for 90% of Target's assets. The assets retained by Target are used to settle its liabilities. Target then distributes
the Acquiring stock and cash received to its shareholders in exchange for all their Target shares. Target then liquidates.
This restructuring qualifies as a:
a. “Type A” reorganization.
c. “Type C” reorganization.
d. Taxable exchange.
43. Weaver Corporation has net assets valued at $800,000 and an NOL of $250,000. On September 30 of the current year,
Weaver is acquired by Loom Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free
reorganization. Weaver shareholders receive 30% of Loom’s shares in exchange for all of their Weaver stock. Assuming
that the Federal long-term tax-exempt rate is 3%, what is the maximum amount of Weaver’s NOL available to Loom in
the current year?
a. $250,000
b. $62,500
c. $24,000
d. Some other amount.
44. Ocelot Corporation is merging into Tiger Corporation under state law requirements. Ocelot transfers assets worth
$300,000 to Tiger. Ocelot receives 30,000 shares of Tiger stock and $200,000 cash. Ocelot transfers the Tiger stock,
$200,000 cash, and all of its liabilities ($50,000) to its shareholder, Van, in exchange for all his Ocelot stock (basis
$100,000). Ocelot then liquidates. How is this transaction treated for tax purposes?
a. Since this qualifies as a “Type A” reorganization, Van recognizes no gain.
b. Since this qualifies as a “Type C” reorganization, Van recognizes a $200,000 gain.
c. Since this qualifies as a “Type A” reorganization, Van recognizes a $150,000 gain.
d. Since this does not qualify as a reorganization, Van recognizes a $150,000 gain.
45. Racket Corporation and Laocoon Corporation create Raccoon Corporation. Racket transfers $600,000 in assets for all
of Raccoon’s common stock. Racket distributes its remaining assets ($300,000) and the Raccoon common stock to its
shareholder, Mia, for all her stock in Racket (basis $950,000) and then liquidates. Laocoon receives all the Raccoon
preferred stock for its $400,000 of assets. Laocoon distributes its remaining assets ($300,000) and the Raccoon preferred
stock to its shareholder, Carlos, for all his stock in Laocoon (basis $200,000) and then liquidates. How will this
transaction be treated for tax purposes?
a. This qualifies as a “Type A” reorganization. Mia recognizes no gain or loss, but Carlos recognizes $300,000
gain.
b. This qualifies as a “Type C” reorganization. Mia and Carlos recognize $300,000 gain, to the extent of the boot.
c. This qualifies as a “Type D” reorganization. Neither Mia nor Carlos recognizes a gain or loss.
d. This is a taxable transaction. Mia recognizes $50,000 loss and Carlos recognizes $500,000 gain.
46. Which of the following statements regarding the applicability of the judicial doctrines to a “Type G” reorganization is
correct?
a. The continuity of interest doctrine is applied to the creditors rather than the shareholders.
b. The sound business purpose doctrine does not apply because the restructuring is dictated by state proceedings.
c. The continuity of business enterprise doctrine does not apply because the business must change to be
profitable.
d. The step transaction doctrine presents a problem, because a “Type G” reorganization may take an extended
Name: Class: Date:
chapter 7
period of time to complete.
47. Which of the following statements is correct with regard to liabilities in corporate reorganizations?
a. While in a “Type A” merger, all the liabilities of the target must be acquired; in a consolidation, only general
liabilities are transferred.
b. In a “Type G” reorganization, the target’s liabilities rarely are liquidated.
c. Liabilities are problematic for a “Type C” only when the acquiring corporation transfers other property in
addition to common stock.
d. Long-term liabilities (bonds) can be exchanged tax-free in a “Type E” reorganization as long as the terms of
the bonds are greater than 10 years and the interest rates are identical.
48. Ula purchased stock in Purple, Inc., six years ago for $150,000. Purple has assets with a value of $225,000 ($175,000
basis) and liabilities of $60,000. Purple transfers $200,000 of assets and all its liabilities to White Corporation in exchange
for White common stock. Purple distributes the White stock and its $25,000 remaining asset (cash) to Ula in exchange for
all her Purple stock. Purple then liquidates. How is this transaction treated for tax purposes?
a. Ula recognizes a $15,000 gain on the exchange.
b. Ula recognizes a $25,000 gain on the exchange.
c. Ula recognizes a $25,000 gain and Purple recognizes a $25,000 gain on the exchange.
d. Purple recognizes a $50,000 gain on the exchange.
49. Asity Corporation is interested in acquiring the majority of Pitta Corporation’s assets. Pitta’s assets are currently
valued at $950,000, and its liabilities are $250,000. However, Asity is not interested in one operating division of Pitta.
Since Pitta desires to be taken over by Asity, Pitta first sells the unwanted division for its net fair market value of
$250,000 ($350,000 FMV assets – $100,000 liabilities). Pitta then transfers its remaining assets and liabilities to Asity for
$450,000 in common voting stock. Which of the following statements is correct with regard to the proposed restructuring?
a. Continuity of interest does not exist for the Pitta shareholders.
b. The continuity of business enterprise test is failed.
c. There is no sound business purpose for this restructuring.
d. The step transaction can be applied to this transaction.
50. Burmese Corporation is interested in acquiring Javanese Corporation by transferring 30% of its stock for all of
Javanese’s assets valued at $500,000 (basis of $150,000) and its $200,000 of liabilities. Javanese has $50,000 of capital
loss carryforwards that it has been unable to use. Javanese concentrates on pharmaceutical research whereas Burmese
manufactures sun glasses. Burmese uses a discount factor of 8%, and the Federal applicable rate is 4%. Javanese will
terminate after the restructuring. How will this transaction be treated for tax purposes?
a. Since Javanese has liabilities in excess of its basis, this excess will be taxable to Javanese.
b. The most of the capital loss carryforward that Burmese can use in any year is $3,000.
c. This transaction could qualify as a “Type A” or a “Type C” reorganization.
d. All of these.
e. None of these.
51. Grebe Corporation is a car dealership that has been in existence for 10 years. It has also been in the car leasing
business for 6 years. Both businesses produce substantial amounts of cash, and Grebe has been investing this cash in
mutual funds for the past 10 years. Grebe is interested in separating its businesses. It will create (a) new corporation(s) to
receive assets in exchange for stock. Which of the following is correct regarding this transaction?
a. Grebe must distribute at least 80% of the new corporation(s) stock to its shareholders in exchange for a
proportionate amount of Grebe’s stock. If the shareholders do not exchange stock, the transaction receives
Name: Class: Date:
chapter 7
dividend treatment.
b. Grebe may create up to three new corporations because it has three lines of business. If three new corporations
are created, Grebe ceases to exist because it will have no assets.
c. The new corporations created will carry over no tax attributes or earnings and profits from Grebe.
d. Using a split-off “Type D” reorganization, Grebe can transfer the car leasing business to the new corporation
and exchange the new corporation stock for some of the Grebe stock held by its shareholders.
52. Which of the following statements is true regarding “Type A” reorganizations?

a. At least 80% of the acquiring corporation’s consideration must be voting stock, but the other 20% can be cash
or preferred stock.
b. The target shareholders must receive a proprietary interest in the acquiring corporation. This means that target
shareholders must receive at least 40% of all the acquiring corporation’s stock.
c. Substantially all the target’s assets must be transferred to the acquiring corporation. This means at least 90% of
the net asset value.
d. Assumption of all liabilities for a “Type A” reorganization includes unknown and contingent liabilities.
53. Which of the following statements regarding “Type B” reorganizations is true?

a. Since a parent-subsidiary relationship is created, the tax attribute carryover limitations are problematic.
b. The acquisition of liabilities can cause problems when the liabilities of the target are greater than 20% of the
total consideration and the acquiring owned target stock prior to the “Type B” reorganization.
c. The acquisition of common and preferred target stock by the acquiring entity can be directly from the
shareholders or from the target corporation.
d. The acquiring corporation must distribute the target stock it obtains to its shareholders. The acquiring
shareholders do not always have to turn in acquiring stock in exchange for the target stock.
54. Xian Corporation and Win Corporation would like to combine into one entity. Win redeems 90% of its common stock
and all of its nonvoting preferred stock in exchange for 40% of Xian’s common and 20% of its nonvoting preferred stock.
Win then distributes the Xian stock to its shareholders. Win then becomes a subsidiary of Xian.
a. This is a taxable transaction.
b. This restructuring qualifies as a divisive “Type D” reorganization.
c. This restructuring qualifies as a “Type B” reorganization.
d. This restructuring qualifies as a “Type E” reorganization.
e. This restructuring qualifies as a “Type C” reorganization.
55. Manx Corporation transfers 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all
$200,000 of its liabilities. Somali exchanges the Manx stock, cash, and its remaining $100,000 of assets with its
shareholders for all their Somali stock. After the exchange, Somali liquidates. The exchange qualifies as what type of
transaction?
d. A taxable exchange.
56. Saucer Corporation has a value of $800,000, basis in its assets of $670,000, and liabilities of $200,000. Cup
Corporation acquires 90% of Saucer’s assets by exchanging $550,000 of its voting stock, $20,000 cash, and assuming
$150,000 of Saucer’s liabilities. The remaining 10% of Saucer’s assets not acquired is $80,000 cash. Saucer distributes the
Name: Class: Date:
chapter 7
Cup stock, $100,000 in cash and associated $50,000 in liabilities to its shareholder, Sam, in exchange for his Saucer stock
(basis $560,000). Saucer then liquidates. How will this transaction be treated for tax purposes?
a. As a “Type A” reorganization. Sam recognizes $50,000 gain and Saucer recognizes $20,000 gain.
b. As a “Type A” reorganization. Sam recognizes $100,000 gain and Saucer recognizes $120,000 gain.
c. As a “Type C” reorganization. Sam recognizes $50,000 gain and Saucer recognizes $20,000 gain.
d. As a “Type C” reorganization. Sam recognizes $40,000 gain and Saucer recognizes no gain.
e. As a taxable transaction.
57. Which of the following statements is true concerning all types of tax-free corporate reorganizations?
a. Assets are transferred from one corporation to another.
b. Stock is exchanged with shareholders.
c. Liabilities that are assumed when cash is also used as consideration will be treated as boot.
d. None is true.
58. Which of the following statements is false?

a. A “Type B” reorganization is most likely to run afoul of the continuity of interest doctrine because the target
remains a separate corporation.
b. Liabilities are problematic for “Type A” and “Type C” reorganizations.
c. The step transaction doctrine can be problematic in “Type B” and “Type C” reorganizations.
d. “Type E” and “Type F” are not likely to be subject to the § 382 limitation.
59. Peony owns all of the Garden Corporation common stock with a basis of $400,000 and a value of $900,000. Her
grandchildren own nonvoting preferred stock with a basis and value of $540,000 that pays a 6% annual dividend. Peony
would like to transfer her ownership of Garden to her grandchildren but retain a guaranteed income from Garden. What
would be the most tax effective method of making this transfer?
a. Peony sells her common stock to her grandchildren. They pay for the stock on the installment method over 20
years with a 6% interest on the unpaid balance.
b. Garden redeems all of Peony’s common stock and issues her a 20-year bond for $900,000 that pays 6%
interest.
c. Garden redeems Peony’s common stock and issues her preferred stock with a 6% yearly dividend rate. Garden
exchanges the grandchildren’s preferred stock for common stock.
d. Peony exchanges 60% of her common stock with her grandchildren for all of their preferred stock. The
grandchildren then have control and Peony retains 40% of the common stock.
60. All the following statements are true about corporate reorganization except:
a. Taxable amounts for shareholders are classified as a dividend or capital gain.
b. Reorganizations receive treatment similar to corporate formations under § 351.
c. The transfers of stock to and from shareholders qualify for like-kind exchange treatment.
d. The value of the stock received by the shareholder less the gain not recognized (postponed) will equal the
shareholder’s basis in the stock received.
61. Which of the following conclusions regarding bonds in tax-favored corporate reorganizations is false?
a. Bonds exchanged must have the same face value to ensure that the holder will receive equal value when the
bonds are repaid.
b. The interest rates on the bonds should be the same percentage because if the bond holder receives a security
with a higher interest rate, the bondholder is receiving an asset with a greater value.
Name: Class: Date:
chapter 7
c. Debt instruments with lives longer than 10 years are treated as securities because they have more risk
associated with the likelihood that they will be repaid; this is similar to the risk with owning stock long-term.
d. Bonds exchanged for stock do not receive tax-favored treatment because this exchange is essentially the
purchase of stock by changing a debt holder into a shareholder.
62. Heart Corporation has net assets valued at $1 million and an NOL of $250,000. On December 31 of last year, Heart is
acquired by Brain Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free reorganization. Heart
shareholders receive 45% of Brain’s shares in exchange for all of the Heart stock. Assuming that the Federal long-term
tax-exempt rate is 3% and Brain’s discount factor is 7%, what is the maximum amount that Brain can use of Heart’s NOL
this year?
a. $12,500
b. $30,000
c. $100,000
d. $250,000
63. Besides the statutory requirements for tax-free treatment for corporate reorganizations, there are several judicial
requirements. Which of the following is not a judicial requirement for corporate reorganizations?
a. The ownership change doctrine should be met.
b. The continuity of business enterprise test must be met.
c. There must be a sound business purpose for the restructuring.
d. The step transaction doctrine should not apply.
64. Humming Inc. is interested in acquiring BirdCo, a supplier of materials for Humming’s products, and feels that it
could improve the management of BirdCo. Current management has been lax in monitoring product quality, which could
lead to recalls or lawsuits. Management of BirdCo is not supportive of a merger because they could lose their positions,
whereas most of the shareholders support the acquisition as a method of obtaining new management. There is a very small
minority of shareholders who do not want to be shareholders of Humming. BirdCo has assets of $5 million with a basis of
$6 million. Its liabilities are $2 million. Which of the following would be the best solution for Humming in its acquisition
of BirdCo?
d. Humming buys BirdCo’s assets for cash and BirdCo distributes the cash to its shareholders and liquidates.
e. Humming buys BirdCo’s stock for cash directly from the shareholders.
65. Monal Corporation merged with Bobwhite Corporation two years ago. At the time of the merger, Monal held an
earnings and profits (E & P) deficit of $250,000, and Bobwhite had a positive E & P of $200,000. Last year’s current E &
P was $ 100,000 for the successor company. Despite having only $10,000 E & P for the current year, Monal makes a
distribution to its shareholders of $270,000. How much of the distribution is taxed to the shareholders?
a. $270,000
b. $210,000
c. $110,000
d. $60,000
66. All the following should apply to a tax favored corporate restructuring except:
a. The reorganization is planned to be accomplished over five months.

Name: Class: Date:
chapter 7
b. Transactions to remove any barriers occur within three months of the restructuring.
c. The purpose of the restructuring is to ensure a supply of raw materials.
d. All of these statements are true.
67. A shareholder bought 10,000 shares of Coral Corporation for $50,000 several years ago. When the stock is valued at
$90,000, Coral redeems the shares in exchange for 5,000 shares of Blush Corporation stock and a $10,000 Blush bond.
This transaction meets the requirements of § 368. Which of the following statements is false regarding this transaction?
a. The shareholder has a realized gain of $40,000.
b. The shareholder has a postponed gain of $30,000.
c. The shareholder has a basis in the Blush stock of $60,000.
d. The shareholder has a recognized gain of $10,000.
68. Pallid Swift, Inc. is an S corporation located in Colorado. In the past year, PallidSwift has become profitable; but due
to its rapid growth, it has no excess cash for distributions. Therefore, Pallid Swift decides that it should become a C
corporation.
a. This transaction qualifies as a “Type F” reorganization.
b. This transaction qualifies as a “Type E” reorganization.
c. This transaction qualifies as a "Type D" shift reorganization.
d. This change is a taxable event.
69. Cuckoo Corporation has just lost a $500,000 product liability suit. Before the lawsuit, its assets were valued at
$600,000 (basis of $400,000), and it had general liabilities of $300,000 and $100,000 of bonds outstanding. It also has a
$50,000 capital loss carryover, and a $150,000 NOL carryforward. Cuckoo is solely owed by Emmy Lou. A state
restructuring creates Turaco as the successor company to Cuckoo. Which of the following statements is false?
a. This transaction qualifies as a “Type G” reorganization.
b. Emmy Lou may not receive any stock in Turaco in the restructuring.
c. When Turaco reduces Cuckoo’s tax attributes for the cancellation of debt income relief, it first reduces the
capital loss, then the NOL, and last the basis in the assets.
d. The bondholders of Cuckoo become shareholders of Turaco.
70. Angus Corporation purchased 15% of Hereford Corporation four years ago for $150,000. Angus acquires 75% more
of Hereford’s stock directly from Hereford shareholders in an exchange for 25% of Angus common stock currently
outstanding. There is still 10% of the Hereford stock held by its original shareholders because they are not interested in
being common shareholders of Angus. This transaction qualifies as what type of reorganization?
d. A taxable exchange.
71. Why is the shareholder’s basis in the new stock received in a corporate reorganization the value of the stock received
less the postponed gain?
a. This ensures that the basis is the value of the stock given up in the reorganization.
b. The realized gain is the amount that would be recognized if the stock was sold outright. This gain may not be
recognized, however, unless there is boot involved.
c. The basis is the vehicle to ensure that the gain postponed will be recognized in the future when the stock is
sold.
Name: Class: Date:
chapter 7
d. A carryover basis or a substituted basis will not include the postponed gain that is necessary in a tax-deferred
transaction such as a reorganization.
72. In which type of corporate reorganization do shareholders receive stock in at least two other corporations in exchange
for all the stock in the original corporation?
a. “Type A” consolidation reorganization.
b. “Type D” spin-off reorganization.
c. “Type D” split-off reorganization.
d. Some other type of reorganization.
73. Target sells assets not desired by Acquirer before entering into a reorganization transaction with Acquirer. In which
reorganization will the step transaction doctrine not apply to the sale by Target?
d. Only “Type A” and “Type C”.
74. Dahlia owns $100,000 in Crimson Topaz preferred stock. The annual dividend rate on the preferred is 4%. She
exchanges this preferred stock for $60,000 in Crimson Topaz bonds paying 4% annual interest and $40,000 in common
stock. How is this transaction treated for tax purposes?
a. All of this transaction is taxable.
b. The transaction is not currently taxable because it qualifies as a “Type E” reorganization.
c. Only the exchange of the preferred stock for the common stock is taxable, because of the reduction in
preferential treatment upon liquidation.
d. Only the exchange of the preferred stock for the bond is taxable.
75. Which of the following statements is true?

a. The dollar amounts involved in reorganizations are generally substantial; thus, it is important that the financial
and tax treatment of the reorganization be consistent.
b. A letter ruling indicates the income tax treatment the IRS will apply to the proposed corporate restructuring
transaction.
c. Careful planning can ensure that all gains recognized by individual shareholders receive beneficial dividend
treatment.
d. None is true.
76. Bobcat Corporation redeems all of Zed’s 4,000 shares and distributes to him 2,000 shares of Van Corporation stock
plus $50,000 cash. Zed’s basis in his 20% interest in Bobcat is $100,000 and the stock’s value is $250,000. At the time
Bobcat is acquired by Van, the accumulated earnings and profits of Bobcat are $200,000 and of Van are $75,000. How
does Zed treat this transaction for tax purposes?
a. Zed recognizes no gain in this reorganization.
b. Zed reports a $50,000 recognized dividend.
c. Zed reports a $50,000 recognized capital gain.
d. Zed reports a $40,000 recognized dividend and a $10,000 capital gain.
77. Flower Corporation has two divisions that it has operated for the last 10 years: Gerbera with a value of $806,000
(basis $400,000) and Daisy with a value of $744,000 (basis 800,000). While Gerbera is profitable, Daisy continues to
Name: Class: Date:
chapter 7
incur losses and created a $350,000 NOL for Flower two years ago. Flower has decided this year it would like to become
two corporations: Gerbera and Daisy. Which of the following is the best method for Flower to become two corporations?
a. Under a § 351 creation of a corporation, Flower transfers all of the Daisy division assets and the NOL to the
new corporation (Daisy) for all of its stock. Flower retains the stock and Daisy becomes a subsidiary without
limitations on its NOL use.
b. Using a split-off, Flower transfers the Gerbera division assets to the new corporation (Gerbera) for all of its
stock. Flower distributes all of the Gerbera stock to its shareholders in exchange for 52% of their Flower stock.
Flower retains the Daisy division and NOL without limitations on its use.
c. Using a spin-off, Flower transfers the Daisy division assets to the new corporation (Daisy) for all of its stock.
Flower distributes all of the Daisy stock to its shareholders. Flower retains the Gerbera division and NOL
without limitations on its use.
d. Using a split-up, Flower transfers the Daisy division assets to the new corporation (Daisy) for all of its stock
and transfers the Gerbera division assets to the new corporation (Gerbera) for all of its stock. Flower
distributes all of the Daisy and Gerbera stock to its shareholders in exchange for 100% of their Flower stock,
and Flower then terminates. The Daisy division retains the NOL without limitations on its use.
Enter the appropriate word(s) to complete the statement.
78. For a “Type C” reorganization, substantially all of the assets means that at least ____________________ percent of
the net asset value and ____________________ percent of the gross asset value.
79. Federal bankruptcy legislation created the Type ____________________ reorganization. To qualify for this type of
reorganization, the corporation must be ____________________ before the reorganization.
80. In a ____________________ reorganization, shareholders may exchange preferred stock for common or common for
preferred stock.
81. Changing from an S corporation to a C corporation is a Type ____________________ reorganization.
82. The tax treatment of the parties involved in a tax-free reorganization almost exactly parallels the treatment under the
like-kind exchange provisions. When ____________________ is received, gain may be ____________________, and
losses are ____________________.
83. Since the “Type B” reorganization precludes the use of ____________________, gain or loss is not recognized. In this
type of reorganization, a ____________________ relationship between the acquiring and target corporations is created.
84. In a ____________________ reorganization, the original corporation must receive at least 80% percent of new
corporations’ stock. The assets transferred to the new corporations must have been owned and conducted as a trade or
business for at least ____________________ years.
85. The ____________________ doctrine ensures that the acquiring corporation cannot immediately sell the target
corporation's assets it receives in the reorganization. The ____________________ doctrine also prevents transactions that
appear to be sales from qualifying as nontaxable reorganizations.
86. The ____________________ provides a restriction on the amount of tax attributes that can be carried over from the
target to the acquiring corporation after an ownership change occurs.
87. The acquiring corporation in a “Type G” reorganization must reduce the tax attributes carried over to it to the extent of
the ____________________ relief.

Name: Class: Date:
chapter 7
88. The term “reorganization” refers to any restructuring that will be tax-free under Code section
_________________________.
89. Liabilities are problematic only in the ____________________ reorganization when the ____________________
corporation transfers other property (boot) as well as stock to the target.
90. In a ____________________ reorganization, each corporation must obtain the approval of the majority of its
shareholders. The acquiring corporation must assume at least ____________________ percent of the target’s liabilities.
91. ____________________ is other property received along with stock in a restructuring falling under § 368. If the
shareholders receive the other property, it can be taxed as ____________________ and/or ____________________.
92. The ____________________ doctrine treats several transactions as if they were one transaction when they are all
integrated. The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or
evasion.
93. The yearly § 382 limitation is computed by multiplying the ____________________ of the loss corporation’s stock on
the change date by the ____________________. For the ____________________, the § 382 limitation is multiplied by
the fraction equal to the number of days remaining in the year divided by the number of days in the year.
94. Loss Corporation carries over an NOL, built-in ordinary losses, and capital losses. The § 382 limitation is applied to
these carryover attributes in the following order: ____________________, ____________________,
____________________.
Match the following items with the statements that follow. Terms may be used more than once.
a. Boot
b. Business credits
c. Capital gain
d. Continuity of business enterprise
e. Continuity of interest
f. Dividend
g. Discount rate
h. Earnings and profits
i. Federal long-term tax-exempt rate
j. Liability assumption
k. Ordinary gain
l. Ownership change
m. Section 382 limitation
n. Sound business purpose
o. Step transaction
95. Carries over to new corporations in a split-up reorganization.
96. A 50 percentage-point change in ownership that occurs because of tax-free reorganization.
97. Tax avoidance is not enough; transaction must have a corporate economic consequence.
Name: Class: Date:
chapter 7
98. Requires the computation of a deduction equivalent when determining its limitation.
99. Rate used to determine the § 382 limitation.
100. When the transactions are so interdependent that the accomplishment of one would be fruitless without the
completion of the series.
101. Shareholders recognize gain to the extent the restructuring qualifies as a redemption.
102. Any asset other than stock or securities received by the target shareholders.
103. Requires at least a 40% carryover ownership by target shareholders.
104. Can be treated as boot if cash as well as voting stock is the consideration used by the acquiring corporation in a
“Type C” reorganization.
What type of reorganization is effected in each of the following independent transactions?

a. “A” reorganization, merger
b. “A” reorganization, consolidation
c. “B” reorganization
d. “C” reorganization
e. “D” reorganization, spin-off
f. “D” reorganization, split-off
g. “D” reorganization, split-up
h. “E” reorganization
i. “F” reorganization
j. “G” reorganization
k. Taxable transaction
105. Flower Corporation is owned by Carry and Kim. All of Carry’s stock (value of $200,000) is exchanged for $200,000
in bonds. Kim exchanges no stock in the transaction.
106. Green Corporation transfers 20% of its voting stock to Brown Corporation’s shareholders in exchange for 60% of
Brown’s common stock and 90% of its preferred stock. Green acquired 30% of Brown’s common stock three years ago in
a taxable transaction. Brown becomes a subsidiary of Green.
107. Solar currently operates nine lines of business that have been in existence for 10 years. To protect its assets from
possible lawsuits, Solar transfers each division to newly formed corporations in exchange for all of the stock of the new
corporations. Solar distributes the stock in the nine new corporations to its shareholders in exchange for 45% of their
stock in Solar.
108. BarkCo and WoodCo contribute all of their assets to Tree Corporation in exchange for all of Tree’s stock. BarkCo
and WoodCo distribute the Tree stock to their shareholders in exchange for their stock in BarkCo and WoodCo. The
exchange completes the liquidation of BarkCo and WoodCo and each ceases to exist.
109. Pear Corporation wishes to merge with Plum Corporation. Plum has more name recognition with consumers, so Pear
would like Plum to be the surviving corporation. Pear transfers all of its assets and only liabilities associated with real
estate to Plum for 45% of Plum’s shares. Pear distributes the Plum stock to its shareholders in exchange for their Pear
stock. Pear then liquidates.
Name: Class: Date:
chapter 7
110. Jones Corporation is insolvent and under state law protection from its creditors. Its assets are transferred to Smith
Corporation in exchange for all of its stock. The stock is distributed to the creditors of Jones, and the shareholders receive
only stock valued at 10% of their stock.
111. Acquiring Corporation receives all the assets of Target Corporation in exchange for 1,000 preferred shares and 6,000
common shares of Acquiring, $25,000 cash, and assumption of all the liabilities of Target. After distributing the
Acquiring stock and cash to its shareholders, Target liquidates.
112. Snow Corporation, located in Washington state, establishes Rain Corporation, located in Arizona. Snow then
transfers all of its assets to Rain in exchange for all of Snow’s stock. After distributing the Rain stock to its shareholders,
Snow liquidates.
113. Black Corporation has been engaged in manufacturing toys and investing in high technology corporate stock for
eight years. Black creates Blue and White Corporations. It transfers the toy division to Blue and the investments to White
in exchange for all of each corporation’s common voting stock. The stock of Blue and White is distributed to Black
shareholders in return for all of their Black stock. Black then liquidates.
114. Apple Corporation transfers voting stock to Orange Corporation in exchange for substantially all of its assets and its
liabilities associated with the plant and equipment. Its general liabilities are not acquired by Apple. Orange distributes the
Apple stock to its shareholders in exchange for their Orange stock. Orange then liquidates.
115. Dipper Corporation is acquiring Bulbul Corporation by exchanging 220,000 shares of Dipper stock and $80,000 cash
for all of Bulbul’s assets (valued at $500,000), liabilities ($200,000), and accumulated earnings and profits ($120,000).
Betty purchased 40% of Bulbul five years ago for $60,000, and Keith purchased the remaining 60% for $90,000. What is
the amount of the gain or loss (if any) that Betty and Keith recognize, assuming that the exchange qualifies as a § 368
reorganization? What is the basis in their new Dipper stock?
116. On March 1, Cream Corporation transfers all of its assets to Coffee Corporation in exchange for 10% of its common
voting stock. At the time of the reorganization, Cream has assets valued at $4 million (basis of $3 million), and its
earnings and profits account shows a deficit of $650,000. Coffee’s earnings and profits as of March 1 were $420,000. Due
to the reorganization, Coffee has an NOL for the current year of $150,000. Coffee still declares its usual dividends of
$100,000 paid on April 30, August 31, and December 31 ($300,000 of total dividends).
How are the Coffee shareholders taxed on the distribution?
117. Present Value Tables needed for this question. Tony is the sole shareholder of Create Corporation. He is a
chemical engineer and has been working hard to create a unique product but has been unsuccessful. Thus, Create has
accumulated an NOL of $420,000. This year he finally finds the right combination for a new cleaning product.
Predicting that Create will be very profitable next year, the corporation borrows $250,000 to pay Tony the salary he
rightly deserves. Next year, Create does become profitable, earning $100,000 before application of carryovers. Mega
Corporation, a huge ($50 million value, 25% combined state and Federal tax bracket) competitor, offers to purchase the
patent from Create for $1,050,000.
Knowing that Create’s NOL should be useful to Mega, Tony suggests a restructuring where he receives $800,000 in Mega
stock, Mega assumes all of Create’s liabilities ($250,000) plus $75,000 cash for the NOL. Mega counter offers with cash
for the NOL (to be determined), and $1,050,000 of stock. It will not assume any liabilities. How much would be the
maximum cash offered by Mega for the NOL, assuming that Mega uses a 12% discount factor and the Federal long-term
tax-exempt rate is 4%? If Tony accepts Mega’s offer, what type of reorganization, if any, is this restructuring?
Name: Class: Date:
chapter 7
118. Pipe Corporation is interested in acquiring all of Ore Corporation. It currently owns 30% of the outstanding Ore
stock, which it purchased six years ago for $250,000. Pipe is a manufacturer of plumbing pipes with assets valued at $3
million and liabilities of $1 million. Ore supplies Pipe with copper from its mines that are valued at $4 million with $3
million in mortgages. Pipe negotiates the restructuring with Ore’s management. Pipe is concerned about potential
environmental issues from the strip mining used by Ore and feels it needs liability protection.
a. Given these facts, what type of reorganization would you suggest for Pipe and Ore?
b. Provide a diagram of the reorganization you suggest.
119. Acquiring Corporation transfers $500,000 stock and land with a value of $400,000 (basis of $250,000) to Target for
most of its assets. The assets not acquired in the “Type A” reorganization are distributed to Target’s shareholder, Tia.
They are valued at $100,000 (basis of $120,000). Acquiring stock and the land also are distributed to Tia in exchange
for her stock in Target. Tia’s basis in her stock is $650,000. What is the gain or loss recognized by Acquiring, Target,
and Tia on this restructuring? What is Tia’s basis in the Acquiring stock?
120. Present Value Tables needed for this question. Sugar Corporation would like to acquire Salt Corporation on
January 1 of the current year in a tax-free reorganization. Salt is particularly appealing to Sugar because Salt has a
$350,000 capital loss that can carry over for five years. Sugar expects large capital gains for the next several years in
addition to its expected $2.5 million net income. At the time of the restructuring, Salt has assets valued at $2 million
(basis of $1.4 million). Sugar is proposing exchanging 45% of its stock for all of Salt’s assets. The Federal long-term tax-
exempt rate is 2.5% and Sugar’s discount rate for investment decisions is currently 7%. What is the maximum present
value of the capital loss to Sugar assuming it has a combined state and Federal tax rate of 25%?
121. Sauce Corporation is very interested in acquiring a controlling interest in Pear Corporation to obtain operating
efficiencies.
Sauce currently owns 30% of Pear, which it bought six years ago for $600,000. Sauce is a fruit processor with assets
valued
at $3 million and liabilities of $1 million. Pear supplies Sauce with fruit from its orchards that are valued at $4 million
with
$3 million in mortgages. Sauce has negotiated a restructuring with most of Pear’s shareholders. It will exchange one share
of its stock for two shares of Pear. Pear’s founder, who own 10% of the outstanding common stock, is not willing to
relinquish her stock and thus, Sauce cannot own 100% of Pear. What type of reorganization is being used here?
122. Cotinga Corporation is acquiring Petrel Corporation through a “Type C” reorganization by exchanging 20% of its
voting stock and $50,000 for all of Petrel’s assets (value of $800,000 and basis of $600,000) and liabilities ($100,000).
Jerrika owns 48% of Petrel (basis $270,000), and Allen owns the remaining 52% (basis $380,000). They exchange their
stock in Petrel for their proportionate shares of the Cotinga stock and cash. What is the value of the Cotinga stock
received by Jerrika and Allen? What are the amounts of gains/losses each recognizes due to the reorganization? What is
Jerrika’s and Allen’s basis in the Cotinga stock?
123. Gera owns 25,000 shares of Flow Corporation’s common stock, for which she paid $250,000. The other 5,000 shares
belong to Gera’s brother, Earl, which he purchased for $50,000. Wanting to expand a few years ago, Flow sold $200,000
in bonds to Earl. The expansion has paid off, and Flow now can afford to redeem 50% of Earl’s bonds.
Rather than have the bond redeemed, Earl would prefer to receive 100 shares of preferred stock for the $100,000 in bonds.
At the same time, Gera also would like to own preferred stock, so she turns in 5,000 shares of her common stock in
exchange for 100 shares of preferred stock and 5,000 shares of her common for a $100,000 bond. Gera and Earl then each
will hold 100 shares of preferred and $100,000 in bonds. Gera still owns 15,000 shares of common, and Earl owns 5,000
Name: Class: Date:
chapter 7
shares of common.
The common stock is valued at $20 per share the day before the preferred is issued. The preferred shares are valued at
$1,000 each. State the type of reorganization, if any, for which these transactions qualify. What is the amount of gain or
loss that Gera and Earl recognize on these transactions?
124. Tin Corporation was created 10 years ago. It currently is valued at $1.5 million as follows: Tacks division
($420,000), Safety Pins division ($580,000), Paper Clips division ($450,000), and investment assets ($50,000). Tin
currently has three shareholders: Antonio, who was the initial shareholder and now owns 40% of the stock (basis in stock
$350,000), and Beth and Chang, each of whom purchased 30% of Tin two years ago for $435,000.
Tin is having management problems because the shareholders cannot agree on the future of the company. They have
determined that it would be best to divide up the company and go their separate ways. Each shareholder feels that the
others do not deserve to continue using the Tin Corporation name.
a. Determine what would be the best method to divide the corporation among the shareholders with
the least amount of taxes.
b. Draw a diagram of the solution you suggested in part a.
c. Any investments that should be received by the new entities will be distributed to the
shareholders in exchange for their Tin stock. Beth is the only shareholder who has indicated that
she prefers to receive some investments. Determine the gain or loss each entity and shareholder
will have upon the division.
125. Briefly describe the Federal judicial doctrines that may apply to tax-free corporate reorganizations.
126. In each of the following reorganizations, there is an exchange of stock for assets or stock for stock. Indicate for each
reorganization the type of stock used for the exchanges and the minimum percentage of stock that may be used for the
restructurings to meet the § 368 requirements.
Types: A; B; C; divisive D.
127. Provide the formula for the § 382 limitation and demonstrate how the formula is used in the year of the takeover.
What is the purpose of the § 382 limitation?
128. Discuss the treatment of accumulated earnings and profits (E & P) in a corporate reorganization when both
corporations have positive E & P and when the target corporation has a negative E & P.
129. Compare the consideration that can be used in “Type A,” “Type B,” and “Type C” reorganizations.
130. What will cause the corporations involved in a § 368 reorganization to recognize gain or loss? What will cause
shareholders of the companies involved in the corporate reorganization to recognize gain or loss? If gain is recognized by
shareholders, what are the different tax character possibilities?
131. Explain whether shareholders are exempted from gain/loss recognition in nontaxable corporate reorganization or the
gain/loss recognition is merely postponed. If postponed, what is the vehicle for ensuring the postponed gain/loss will be
recognized in the future?
132. Both § 382 and “Type G” reorganizations allow beneficial tax attributes to carry over from the loss corporations to
Name: Class: Date:
chapter 7
the successor. Compare the list of attributes are carried over for “Type G” reorganizations and for § 382, and the order of
reduction/use of these attributes.

Name: Class: Date:
chapter 7
Answer Key
1. False
2. True
3. True
4. False
5. True
6. True
7. False
8. True
9. True
10. True
11. False
12. True
13. False
14. False
15. False
16. False
17. True
18. False
19. True
20. False
21. True
22. True
23. True
24. False
25. True
Name: Class: Date:
chapter 7
26. False
27. True
28. True
29. False
30. False
31. False
32. False
33. True
34. False
35. c
36. b
37. d
38. b
39. b
40. d
41. e
42. c
43. d
44. d
45. a
46. a
47. c
48. a
49. d
50. e
51. d
Name: Class: Date:
chapter 7
52. d
53. c
54. a
55. a
56. e
57. d
58. a
59. c
60. c
61. b
62. b
63. a
64. b
65. b
66. b
67. c
68. a
69. c
70. b
71. c
72. d
73. a
74. d
75. b
76. d

Name: Class: Date:
chapter 7
77. c
78. 90, 70
79. G, insolvent
80. Type E
81. F
82. boot, recognized, not recognized
83. boot, parent-subsidiary
84. divisive "D", five
85. continuity of business enterprise, continuity of interest
86. Section 382 limitation

§ 382 limitation
87. cancellation-of-debt-income
COD income
88. 368
89. Type C, acquiring
90. Type A, 100
91. Boot, dividends, capital gain
92. step transaction, sound business purpose
93. fair market value, Federal long-term tax-exempt rate, initial (first) year
94. capital loss, built-in ordinary loss, NOL
95. h
96. l
97. n
98. b
99. i
100. o

Name: Class: Date:
chapter 7
101. c
102. a
103. e
104. j
105. k
106. c
107. f
108. b
109. d
110. j
111. a
112. i
113. k
114. d
115. Bulbul is worth $300,000 ($500,000 – $200,000). Betty receives $120,000 (40%) of this amount; Keith receives
$180,000.
Betty’s and Keith’s gains and stock basis are computed as follows.
Adjusted Basis
Realized Gain Recognized Gain Postponed Gain in Dipper Stock
Betty $120,000 $32,000 $60,000 $ 88,000
(60,000) (32,000) (28,000)
$ 60,000 $28,000 $ 60,000
Keith $180,000 $48,000 $90,000 $132,000

(90,000) (48,000) (42,000)
$ 90,000 $42,000 $ 90,000
116.
The $300,000 distributions are taxed to the shareholders as dividends to the extent of
$270,000 and $30,000 is a return of capital. As of the date of the merger, Coffee
Corporation maintains two separate earnings and profits accounts: its own original with a
positive balance of $420,000 and Cream’s with a deficit of $650,000. The NOL for the
year reduces Coffee’s original earnings and profits account to $270,000 ($420,000 –
Name: Class: Date:
chapter 7
$150,000). Since Coffee has an earnings and profits account with a positive balance, the
distribution is treated as a dividend to the Coffee shareholders until the earnings and
profits are exhausted; then $30,000 of the distribution in December is a return of capital.
117. Mega should not pay more than $59,327 for the NOL. Use a “Type C” reorganization.
Since Create would experience a more than 50 percentage-point change in ownership, the § 382 limitation would apply.
Mega would acquire assets from Create with a value of $1,050,000. With a 4% Federal long-term tax-exempt rate, the §
382 limitation is $42,000 ($1,050,000 × 4%) and the tax benefit of this deduction would be $10,500 ($42,000 × 25%). It
would take Mega 10 years to fully utilize the NOL ($420,000 ÷ $42,000). Using an 12% discount rate for 10 years
(5.6502), the $10,500 tax savings for 10 years is valued at $59,327 ($10,500 × 5.6502).
The merger proposed by Mega would meet the requirement of a “Type C” reorganization. With a “Type C,” Mega can
acquire none of Create’s liabilities. Since the only cash is the $59,327, 95% of the assets are acquired with Mega stock.
With a “Type A” merger, all liabilities would need to be assumed by Mega. If the acquisition proceeded as Tony
suggested, the transaction would not meet the “Type C” requirements of having 80% of the consideration consist of Mega
stock. The $75,000 cash will cause the $250,000 liabilities to be treated as boot. Therefore, $325,000 ($75,000 cash +
$250,000 liabilities) of the $1,125,000 total consideration ($800,000 stock + $75,000 cash + $250,000 liabilities) is not
stock. This is 29% of the total amount. Thus, stock used would be less than 80% and therefore not meet the “Type C”
requirements. Tony should accept Mega’s offer of $1,050,000 in stock and $59,327 as this would meet the requirements
of a "Type C" reorganization. The cash only amounts to 5% of the assets.
118.
a. The acquisition could be set up as a “Type B” reorganization. Pipe can acquire
the 70% of the outstanding common stock by exchanging Pipe voting stock for
Ore stock. Since Ore will remain a separate corporation, Pipe can protect its
assets from potential environmental lawsuits. With the previously acquired 30%
of Ore stock, Pipe will now own 100% of the stock and therefore meets the
control requirement for a “Type B” reorganization. The fact that the previously
owned 30% was acquired with cash does not violate the solely voting stock
consideration requirement.
b. Diagram of “Type B” Reorganization

Name: Class: Date:
chapter 7
119. Acquiring recognizes $150,000 gain on land; Target cannot recognize its loss on the assets;
and Tia recognizes a $350,000 gain. Tia’s basis in her stock $500,000.
Acquiring’s gain on the land is $400,000 value – $250,000 basis. While Target realizes a
$20,000 loss on the assets ($100,000 value – $120,000 basis), loss recognition is disallowed.
Tia receives $1 million for her Target stock ($500,000 Acquiring stock + $400,000
land + $100,000 assets), and her basis in the stock is $650,000. The gain recognized
by Tia is caused by the boot received ($400,000 land + $100,000 assets). Since Tia’s
recognized gain cannot be greater than her realized gain, her gain is limited to $350,000.
Thus, Tia’s stock basis is $500,000. Gain and basis amounts are computed as follows.
Adjusted Basis in
Realized Gain Recognized Gain Postponed Gain Acquiring Stock
Tia $1,000,000 $350,000 $350,000 $500,000
(650,000) (350,000) (–0–)
$ 350,000 $ –0– $500,000
120. Since there is more than a 50 percentage-point ownership change in Salt, the capital loss carryforward will be subject
to the § 382 limitation. The maximum period for a capital loss carryforward is five years. The amount of capital loss that
Sugar can use to offset its future income is $50,000 per year ($2 million × 2.5%), and the tax benefit of this is $12,500
($50,000 × 25%). . Therefore, Sugar can use only $250,000 of the capital losses in the next five years ($50,000 × 5).
Using a 7% discount factor for five years, the present value of the usable capital loss carryforward is $51,253 (12,500 ×
4.1002).
121.
The acquisition could be set up as a “Type B” reorganization. Sauce can acquire
the 60% of the outstanding Pear common stock it does not own either directly from
the Pear shareholders or through Pear by exchanging Sauce voting stock for Pear
stock. With the 30% previously acquired, Sauce will now own 90% of the Pear
stock and therefore meet the 80% control requirement for a “Type B”
Name: Class: Date:
chapter 7
reorganization. The fact that the previously owned 30% was acquired with cash
does not violate the solely voting stock consideration requirement.
122. Value of Cotinga stock received: Jerrika $312,000; Allen $338,000. Jerrika has $24,000 recognized gain; Allen
cannot recognize his loss. Basis in Cotinga stock: Jerrika $270,000; Allen $354,000.
Total Cotinga stock exchanged $650,000 ($800,000 assets – $100,000 liabilities – $50,000). Jerrika receives $312,000 in
Cotinga stock ($650,000 × 48%) and $24,000 cash for a total of $336,000. Allen receives $338,000 in Cotinga stock
($650,000 × 52%) and $26,000 cash for a total of $364,000.
The gain recognized for Jerrika and Allen on the exchange and their basis in the Cotinga stock is computed as follows.
Realized Gain/ Recognized Gain/ Postponed Gain/ Adjusted Basis

Loss Loss Loss in Cotinga Stock
Jerrika $ 336,000 $24,000 $ 66,000 $312,000
(270,000) (24,000) (42,000)
$ 66,000 $ 42,000 $270,000
Allen $ 364,000 $ –0– ($16,000) $338,000

(380,000) (–0–) + 16,000
($ 16,000) ($16,000) $354,000
123. The exchange of Earl’s bond for preferred stock qualifies as a “Type E” reorganization. The exchange of Gera’s
common stock for preferred stock is also a “Type E” reorganization, but her exchange of common stock for a bond is a
taxable transaction. A “Type E” reorganization does not include an exchange of stock for bonds in its nontaxable
treatment.
Since the preferred stock received by Earl is valued at $100,000 and the bond he is exchanging is $100,000, he has no
realized or recognized gain. His basis in his preferred stock is $100,000.
Gera receives a $100,000 bond for 5,000 shares having a basis of $50,000 [($250,000 basis/25,000 shares) × 5,000] and
recognizes a gain of $50,000 ($100,000 – $50,000). Gera recognizes no gain on the exchange of her 5,000 common shares
(value of $100,000) for 100 shares preferred (value of $100,000).
124.
a. A divisive “Type D” split-up reorganization will meet the needs of the

shareholders with the least amount of taxes. The split-up will ensure that none of
the shareholders are able to use the Tin Corporation name in the future, because
Tin is required to cease to exist after the reorganization.
b. Diagram of the split-up “Type D” reorganization.

Name: Class: Date:
chapter 7
c. Since Antonio owns 40% of the Tin stock, he should receive 40% of the value
of Tin, or $600,000 ($1.5 million × 40%). The Safety Pins division assets
($580,000) should be transferred to the Safety Pin Corporation in exchange for
its stock. This Safety Pin stock plus $20,000 of investments will be exchanged
for Antonio’s Tin stock. The $20,000 of investments will cause Antonio to
recognize a $20,000 gain and his basis in the Safety Pin stock is $350,000
($600,000 – $350,000 = $250,000 realized gain; recognized $20,000; postponed
$230,000; and $580,000 – $230,000 = $350,000 basis in Safety Pin stock).
Beth owns 30% of the Tin stock and should receive 30% of the value of Tin, or
$450,000 ($1.5 million × 30%). The Tacks division assets ($420,000) should be
transferred to the Tacks Corporation in exchange for its stock. The Tacks stock
plus $30,000 of investments should be exchanged for Beth’s Tin stock. The
$30,000 of investments will cause Beth to recognize a $15,000 gain, and her
basis in the Tacks stock is $420,000 ($450,000 – $435,000 = $15,000 realized
gain; recognized $15,000; postponed $0; and $420,000 basis in Tacks stock)
Chang also owns 30% of the Tin stock and thus also should receive 30% of the
value of Tin, or $450,000 ($1.5 million × 30%). The Paper Clips division assets
($450,000) should be transferred to the Paper Clips Corporation in exchange for
its stock. The Paper Clips stock will be exchanged for Chang’s Tin stock. Since
Chang received no boot, he recognizes no gain and therefore has a carryover
basis of $435,000 in the Paper Clip stock.
125.
Even if the statutory reorganization requirements are literally followed, restructurings will not be treated as tax-free unless
they also meet the following judicial doctrines.
Step transaction. This doctrine prevents taxpayers from engaging in a series of transactions for the purpose of obtaining
tax benefits that would not be allowed if the transaction was accomplished in a single step. When the steps are so
interdependent that the accomplishment of one step would be fruitless without the completion of the series of steps, the
transactions may be collapsed into a single step.
Sound Business Purpose. Tax-free treatment of a restructuring is only available to those transactions that are motivated
by some valid business needs of the corporations. The economic benefits of the reorganization must go beyond mere tax
avoidance. Thus, a reorganization to acquire tax attributes of another corporation, such as an NOL or business credits,
does not have a sound business purpose and will not receive tax-free treatment.
Continuity of Business Enterprise. To ensure that the tax-free treatment is limited to transactions that are mere changes
Name: Class: Date:
chapter 7
in the form and not the substance of the business, this test requires that there be a continuation of the target’s business.
Specifically, this test requires the acquiring corporation to either (1) continue the target corporation’s historic business
(historic business test) or (2) use a significant portion of the target corporation’s assets in its business (asset use test).
Continuity of Interest. To distinguish between a sale of assets and a reorganization, the continuity of interest doctrine
requires that the shareholders of the target corporation have a continuing investment in the succeeding entity after the
restructuring. To qualify for tax-free treatment, the target corporation shareholders must receive acquiring corporation
stock equal to at least 40% of their prior stock ownership in the target.
126. The stock requirements for § 368 reorganizations are as follows.

Type A: Acquiring may use common or preferred, voting or nonvoting in the exchange for target’s assets. However,
∙
the continuity of interest doctrine requires at least 40% be common stock.
∙ Type B: Acquiring must exchange voting stock for common or preferred, voting or nonvoting stock of the target.
After the reorganization, the acquiring must own at least 80% of the target’s stock. The acquiring corporation’s target
stock owned before the reorganization can be counted toward the 80% control requirement.
Type C: Acquiring must use voting stock in the exchange for target’s assets. At least 80% of the assets must be
∙
acquired with voting stock.
∙
Type D Divisive: The original corporation must receive at least 80% of the target’s stock (80% of the total combined
∙
voting power and 80% of all other classes of stock).
127.
The formula for determining the § 382 limitation is as follows.
Loss Corporation’s FMV on the change dated
× Federal long-term tax-exempt rate
= Yearly § 382 limitation
× Number of days remaining in change year/number of days in year (365 or 366)
= Change year § 382 limitation
The purpose of the § 382 limitation is to discourage the acquisition of a corporation merely for its loss carryovers or
unused tax credits. The § 382 limitation restricts the use of loss tax attributes to a hypothetical future income stream that
would have been received if the stock were sold and the proceeds invested in long-term tax-exempt securities.
128. The accumulated earnings and profits (E & P) of corporations that are parties to a reorganization are added together
when both corporations have positive E & P. Thus, the acquiring corporation’s E & P is increased by the target’s E & P. If
the target corporation, however, has a negative E & P, the accounts are not commingled. The negative E & P is treated as
received by the acquiring corporation as of the reorganization date. The negative E & P may offset only the future
earnings of the successor corporation. Thus, the successor corporation must maintain two separate E & P accounts; one
for prior E & P and another for the deficit E & P transferred to the corporation and subsequent earnings.
129. With a “Type A” reorganization, the consideration can be stock and other property. There is no requirement that the
stock be voting. However, to meet the continuity of interest doctrine, at least 40% of the consideration should be stock. A
“Type B” reorganization requires that all of the consideration used by the acquiring corporation be voting stock. If other
than voting stock is used, the “Type B” will not be tax-free. Voting stock must be 80% of the consideration given by the
acquiring corporation in a “Type C” reorganization. If cash or other property is also given, the liabilities will be
considered boot. This can cause the “Type C” to lose its tax-free status. If only stock is used, the liabilities are not
considered boot.
Test Bank for South-Western Federal Taxation 2021: Corporations, Partnerships, Estates and T
Name: Class: Date:
chapter 7
130. Corporations involved in § 368 reorganizations are not permitted to recognize losses. The acquiring corporation can
recognize gain if it transfers appreciated property (boot) along with its stock to the target. The target will recognize gain if
it fails to distribute the boot to its shareholders. The target also can recognize gain if it distributes its own appreciated
property to its shareholders.
Shareholders will recognize gains when they receive boot (nonstock property) in exchange for their stock in their
corporation. Shareholders can recognize losses if they only receive boot and no stock.
Shareholder recognized gain in a corporate reorganization may have the following tax characters.
∙ Dividend to the extent of the shareholder’s proportionate share of corporate earnings and profits
(E & P). The remaining gain is capital gain.
∙ If the requirements of § 302(b) can be met, the transaction will qualify for stock redemption
treatment, usually as a capital gain.
131. In reorganizations, neither gain nor loss is recognized by the shareholders as long as the corporations meet the
legislative and judicial requirements for nontaxable treatment. However, this does not mean that the shareholders are
exempted from taxation. Rather, the recognition of the gain/loss is merely postponed until there is a taxable transaction.
The vehicle for postponing gain/loss that is not recognized is the basis in the new stock received. If no gain or loss is
recognized, the basis in the new stock is carried over from the basis in the old stock. If gain is recognized because the
shareholder received “boot,” the basis in the new stock is adjusted to account for the remaining gain realized but not
recognized (postponed gain). The four-column template of Concept Summary 7.1 is useful for determining the
consequences of a corporate reorganization.
132.
The order of reduction in tax attributes in a “Type G” reorganization is as follows.
1. NOLs
2. Capital losses
3. Basis in property
The order for application of the § 382 limitation is as follows.
1. Built-in capital losses
2. Capital losses
3. Built-in ordinary losses
4. NOLs
Thus, not only is the order different, but also the tax attributes themselves are different. For the “Type G,” NOLs are
reduced before capital losses, whereas with § 382, capital losses are before NOLs. The “Type G” includes a reduction in
basis that, at the election of the acquiring corporation, can be reduced before the other attributes. Having a basis reduction
does not make sense for the § 382 limitation.
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II.
Hij wist zelf niet hoe lang hij zoo wezenloos voorover gelegen had,
toen hij voelde, dat iemand zijn schouder aanraakte.
Verschrikt keek hij op, als plotseling ontwakend.
O, ’t was Paula.
„Wat is er?” vroeg ze verwonderd. Ben je hier in slaap gevallen?.…

Doch spoedig trof haar ’t ontdane zijner gelaatstrekken. Meteen viel
haar blik op de brief vóor hem op ’t bureautje. Ze herkende hem
onmiddellijk.
God, hoe kwam dat ongelukkige ding hier?!
Paula begreep in een oogwenk haar toestand, zijn smart; en, hem
kennend, voorzag zij de gevolgen van ’t gebeurde.
Eén oogenblik stond ze in beraad. Zou ze ontkennen, en er iets op

verzinnen? Hij was lichtgeloovig genoeg, en wie is dat meer dan de
verliefde man eener verleidelijke vrouw? Maar hoe kon dat? De brief
was immers een acte van beschuldiging i n o p t i m a [16]f o r m a .…
Nee, in ’s Hemels naam: bekennen dan maar, en op zijn gevoel
werken. Hij aanbad haar, kon niet buiten haar, en zou vergeven, als
hij maar berouw meende te zien. In ieder geval moest ze zien hem
gunstig te stemmen, alle vijandigheid te voorkomen; want zoolang
dat document in zijn handen was, kon hij echtscheiding aanvragen
op grond van overspel van h a a r ! Mocht het haar gelukken ’t stuk
machtig te worden, wel, dan kon ze immers nog altijd elke erkenning
van schuld loochenen.…
Zij zou ’t eerst spreken, dadelijk elke uitbarsting van zijn kant stuiten:
„O, ik zie ’t,” zei ze zacht. „Je hebt die brief gelezen.… Die ellendige
oude geschiedenis, waar ik zooveel om geleden heb.… waar ik
zooveel nachten van wroeging om doorgebracht heb.… Ik heb God
zoolang om vergiffenis gebeden; maar ’t heeft niet mogen zijn.… De
straf moest eenmaal komen.… O God, o God!”
En snikkend wierp ze zich voorover op een kleine sofa, die bij ’t

bureautje stond.
„Dat jij ’t weten moest, weten moest.…” ging ze, telkens afbrekend,
voort, „waarom, mijn God, waarom? Jij zoo goed en zoo lief voor mij,
dat jij deze slag hebben m o e s t ! ’t Is vreeselijk, vreeselijk.… O, wat
heb ik je lief gekregen na die verschrikkelijke dingen, die er zijn
gebeurd, juist omdat ik voelde [17]hoe onwaardig ik was, dat jij
zooveel van me hieldt.… En nu hoû je niets meer van me.… Nu
veracht je me.… Nu wil je niets, niets meer van je Paula weten.… O,
mijn God, wat ben ik ongelukkig!”
Ze hield even op, en wachtte.
Hij zeide niets, verroerde zich niet. Paula’s woorden drongen helder
in zijn ooren als in een levendige droom. ’t Tooneel daar vóor hem,
zijn vroolijke, luchtige Paula, wanhopig schreiend en zichzelf
beschuldigend, leek hem onwerkelijk. De pijnlijke waarheid moest
nog tot hem doordringen.
Paula ging voort.
„O, je antwoordt niet.… Je Paula is niets meer in je oogen. Je zult

haar nu wegsturen als een straatmeid.…” En weer snikte ze, en
woelde wanhopig heen en weer, terwijl ze het kussen, dat er lag,
krampachtig tegen zich aan drukte.
Larsen stond op, en trad op haar toe.
„Paula!” zei hij dof.
„Willem.…” En ze barstte uit, zich neerwerpend vóor zijn voeten:
„O, mijn God, vergeef me! Willem, vergeef me wat ik misdaan heb. Ik
ben zoo diep, zoo diep rampzalig!”
„Kom, sta op.…” zeide hij. „Ik kan dat niet aanzien. Kom, Paula,
wees kalm. Ga daar zitten.”
Ze deed het, gedwee, en verborg het gelaat tusschen de handen. [18]
„Als je berouw oprecht is,” ging Larsen somber voort, „heeft God je
de zonde al lang vergeven. En dan.… hoe zou ik dan mijn vergiffenis
weigeren kunnen?…”
Met blijde verrassing keek ze op.
„Je vergeeft me. Och, Willem, is ’t waar?”
„Mijn kind, wat geeft dat nog? Wat verandert dat aan onze ellende?
Ik kan je vergeven—o, van ganscher harte—maar kan ik ooit
v e r g e t e n ?”
Hij wendde ’t hoofd af, en zette zich weer op de stoel vóor ’t

bureautje, tegenover haar.
„O, maar dan vergeef je me ook n i e t !” riep Paula opnieuw

wanhopig uit. „Dan vergeef je me ook niet!”
„Dat doe ik wel. Ik voel in mijn hart geen vijandigheid, geen

wraakzucht tegen jou, maar mijn verstand kan me niet wijsmaken
dat ik gedroomd heb, dat ’t gebeurde niet gebeurd is.…”
„En wat dan?” vroeg ze klagelijk.
„Wat dan? Dat verder samenleven tusschen ons onmogelijk is.”
Ze antwoordde niet, maar wachtte in spanning, ’t hoofd voorover.
„Hoe ik ook mijn best deed om goed en lief tegen je te zijn, ik zou ’t
spook.… niet weg kunnen jagen. ’t Zou steeds tusschen jou en mij
staan. En dan de herinnering aan ’t kind.… ik was er zoo gelukkig
mee.…” [19]
Zijn stem stokte. Een dikke traan ontperste zich aan zijn oogen.
„Nee, Paula, dat zou niet gaan.… Dat zou een marteling wezen voor
ons beiden.…”
„Dus hoû je dan niets, niets meer van je Paula?”
Weer wilde ze zich op de grond werpen, maar Larsen weerhield

haar.
„Of ik nòg van je houd? Ik weet ’t niet.… Eén ding is zeker: mijn
heilige heeft haar stralenkrans verloren.… Jij was mijn heilige.…”
Weer werden zijn oogen vochtig, en hij keek strak vóor zich naar de
grond, zwijgend.
„Och, Willem,” vleide zij zacht na een poos.
„Ja?” Hij keek niet op, maar luisterde.
„Als je wist, als je wist hoe alles gekomen was.… O, ik zal ’t je

zeggen.”
Hij viel haar in de rede, bruusk:

„Och, waarom? Ik w i l niets weten, niet meer dan wat ik weet. Ik zeg
je immers dat ik je vergeef.… nu al, nu ik het nauwelijks weet. Wat je
me ook vertellen wil, ’t verandert immers niets aan de zaak. Je bent
me ontrouw geweest.… en dat niet alleen, groote God, maar mijn
kind, ’t kind, dat ik voor ’t mijne hield, was van hèm.… van Rudolf!”
„O, maar ik kan niet uitstaan dat je me verkeerd beoordeelt, je mòet

weten hoe alles gegaan is.… Ik was gek, gek toen ik.… zes jaar
geleden.… [20]deed wat me later.… zulk een wroeging gaf. En ik
alleen was de schuldige, toen.… dat eene oogenblik.… O, laat me je
alles vertellen!”
„Goed dan,” klonk het lusteloos en mat.
„Hij was niet de verleider.… ik was ’t die hem ertoe bracht.”
„Bah, een m a n !” viel Larsen in. „’t Is een schande voor een man
zich te l a t e n verleiden door een vrouw!”
„Zeker, zeker, maar ’t is toch een verzachtende omstandigheid.… En

wat mij aangaat.… ik wist niet wat ik deed.… Ik voelde me eenzaam,
verlaten. Jij was steeds in je boeken.… Ik dacht dat je niet meer van
me hieldt.…”
Larsen trok de schouders op.
„’t Was verbeelding, zeker, dat zie ik nu wel in.… maar toen.… toen
geloofde ik ’t.… en hij—Rudolf—was zoo vriendelijk en zoo
belangstellend, en zoo vol attenties, en zoo altijd om mij heen. Jij zat
in je studeerkamer. En dan zat hij bij mij.… soms tot ’s avonds laat.
Of jij was uit, naar de bibliotheek … Eens op een avond.…”
Larsen maakte een afwerend gebaar.

„Ik weet heusch niet hoe ’t kwam,” ging Paula hartstochtelijk voort.
„Maar.… ’t was maar eens, net eens.…”
Weer maakte Larsen een gebaar, ditmaal van ongeduld [21]en

wrevel, als wilde hij zeggen: „Alsof dat er iets toe doet!”
„Ik zeg ’t alleen, omdat ik wil hebben dat je alles begrijpt.… Ik ben
geen slechte vrouw.…” Ze snikte en kon bijna niet voortgaan. „Ik bèn
niet slecht.… ’t was een „surprise des sens”.… een dolheid.… een
oogenblik van waanzin.… Niets overdachts.… geen bedrog.…”
„Maar ’t bedrog kwam later,” zei Larsen bitter.
„Later? Ja, hoe kon ik anders.… En juist dit was mijn straf. Ik moest
je bedriegen, omdat.… omdat.…”
Larsen keek op, een vraag in de oogen.
„Omdat ik je niet verliezen woû, omdat ik je liefde niet verliezen woû,

omdat ik zooveel van je hield.”
„O zeker, dat wàs zoo, hoe ongelooflijk ’t je nu ook klinkt. Ik hield

door mijn berouw.… meer van je dan ooit te voren.…. Dat wàs zoo,
dat wàs zoo!”
Weer schreide ze hartstochtelijk.
„Goed, laat dat zijn,” zei Larsen bedaard, „maak je nu maar niet zoo
naar. De zaak wordt er niet beter door. ’t Gedane is onherstelbaar.
En mijn geluk is toch verwoest.”
Hij liet het hoofd weer zinken, in doffe smart.
„Wat bedoel je? Kan ik dan niet meer goed maken wat ik deed toen
ik buiten mezelve was? God, dat [22]kan je niet meenen.… jij zoo
goed en vergevensgezind.…”
„Maar, mijn hemel, begrijp me dan toch! Zoo iets i s niet goed te
maken. Jij kunt me niet het geloof teruggeven, mijn geloof in jou, dat
ik voor goed verloren heb.… Dat heeft niets met vergeven of
goedheid te maken.… Ik heb medelijden met je.… veel medelijden.
Maar dat jaagt ’t spook van mijn schande en mijn verdriet niet weg!”
Paula antwoordde niet. Ze zag haar spel verloren, en dit dreef haar
schier tot wanhoop.
„Mijn God, mijn God,” bracht zij eindelijk uit. „Eisch van me wat je wil.
Ik wil je slavin zijn, boete doen als een ellendige zondares. Ik zal je
je geluk teruggeven. Och, Willem, geloof me, ik zàl ’t je teruggeven!
Maak me niet ellendig. Ik kan niet zonder jou leven.… Een scheiding
zou me doen sterven van verdriet.…”
Ze wist hoe zijn liefde voor haar geweest was: ze geloofde niet dat
zulk een liefde plotseling dood kon wezen.
Haar lang geoefende kunst om komedie te spelen kwam haar

uitstekend te pas. O, ze zou winnen ten slotte. Hij k o n niet buiten
haar, en niets kon hem meer verteederen dan de betuiging van haar
liefde voor hem. Ze had hem daarmee immers reeds zoo dikwijls
bekoord. Thans speelde ze hoog spel: ’t gold [23]haar heele
toekomst, haar aanzien als vrouw van de wereld, ’t voorkómen van
een schandaal.
„Ik zie geen andere uitweg,” antwoordde Larsen en stond op. „Kom
Paula, laat me alleen met mijn ellende. Verder spreken hierover is
me nu te pijnlijk. Laat me in Godsnaam alleen. Wat geeft ’t alles: we
kunnen ’t niet eens worden.…”
Zij zag ’t nuttelooze van verder tegenspreken voor ’t oogenblik in, en
achtte het wijs thans maar toe te geven. O, ze zou hem wel
verteederen: ’t moest, ’t moest.…
En opstaande richtte ze zich naar de deur, met gebogen hoofd en

loome tred.
Even hield ze op, en keek om. Dan zei ze op bedeesder toon, als
een kind dat knorren gehad heeft:
„En je thee? Wil je van avond geen thee? Hier boven?”
„Och, laat maar.”
Toen ze de deur achter zich gesloten had, zuchtte hij diep, hief de
rechter arm op, liet zijn hand met kracht op zijn dij neervallen, en
schudde ’t hoofd met verwrongen gelaatstrekken.
Dan verzonk hij in zijn vorig broeden. [24]

[Inhoud]
III.
Hoe weinig kenden Larsen en Paula elkander! Hadden ze

onmiddellijk na hun laatste gesprek in elkanders harten kunnen
lezen, hoe zouden ze geschrokken zijn!
Larsen twijfelde geen oogenblik aan Paula’s oprechtheid, haar innig

berouw.
Zij dacht het eerst aan haar eigen domheid om die brief te laten
slingeren, en overlegde vrij kalm haar plan: òf hem weer aan zich
binden door liefdevolle onderwerping, door berouwvertoon, door de
bekoring harer lichamelijke aantrekkelijkheid, òf als dat alles niet
baatte—als!—dan hem de brief op de een of andere wijze zien te
ontfutselen: dan was alle bewijs verloren. ’t Kwam geen oogenblik bij
haar op dat Larsen’s edelmoedigheid waarschijnlijk niet gedogen
zou van het bewijsstuk tegen haar gebruik te maken. O, en àls hij
dat deed, dan zou haar houding ook plotseling veranderen, dan zou
ze eindelijk het dwangbuis harer gehuichelde liefde voor hem
afwerpen; [25]’t had haar reeds zooveel jaren beklemd! Dan zou ze,
alleen met hem, alle veinzen laten varen. Dan was hij haar vijand,
haar verklaarde tegenstander; en hoe dieper hij dàn zijn ellende en
machteloosheid voelde, hoe meer voldoening haar de overwinning
zou geven: vóor de rechter zou ze hardnekkig ontkennen.…
Haar kind? Och, daarom zou ze ’t niet doen: het te verliezen in

zooverre dat Larsen het krijgen zou, was haar als moeder niet
bepaald ondragelijk. Ze hield van ’t kind, op haar manier, zonder
diepte. Zij behoorde nu eenmaal tot dat soort van vrouwen, bij wie
elk gevoel aan de oppervlakte blijft. Didi was een soort troetelpopje
voor haar geweest, vooral toen ze nog klein was: ’t kind zag er altijd
keurig uit, en in stoffelijke zin ontbrak haar niets. Innige omgang
tusschen moeder en dochter had nooit bestaan, en de liefste
indrukken van Didi’s gemoedsleven dankte ze alle aan haar vader.
Deze onderhield zich ernstig en vriendelijk met haar, stelde belang in
al haar kleine verdrietjes en genoegentjes, haar gelukjes en
tegenspoedjes; vermaande en leerde haar, en was haar zelden
vermoeide raadsman en inlichter. Bij de moeder wist ze al spoedig
dat ze voor al wat buiten materieele zorg ging niet terecht kon.
Gezegden als „Och, kind, zeur niet! Jengel zoo niet! Verveel me
niet!” waren haar maar al te wel bekend. Neen, zij [26]zou Didi weinig
missen, en als ze ’t kind maar nu en dan eens zag, zou haar
moederlijke behoefte voldoende bevredigd wezen. Dat was ’t niet;
maar ’t verlies van haar waardigheid, haar wereldsch aanzien, en
haar gemakkelijk vrij leven naast een domverliefde, lichtgeloovige,
doodgoede man, ’t verlies van haar naam.… dat was wat anders: die
kans te ontloopen was wat strijd en inspanning waard. Ze besefte
zoo goed dat haar vrijheid van handelen als getrouwde vrouw veel
grooter was, en van harte stemde zij in met die Fransche
wereldkenner, die beweerde dat een kokette vrouw, wil ze ’t goed
hebben, getrouwd moet wezen. En „gescheiden” te zijn! ’t Was een
schrikbeeld, waar ze niet aan denken woû. Wat was een gescheiden
vrouw in ’t oog der wereld, ook al geloofde men aan haar onschuld?
Ze wist hoe men er de neus voor optrok, als droeg zulk een vrouw
een schandmerk op ’t voorhoofd. O, afschuwelijk, akelig.…
Deze gedachten speelden Paula door ’t hoofd, toen ze met gefronste

wenkbrauwen bezig was beneden in de huiskamer voor de thee te
zorgen. Didi, een slank opgeschoten meisje met mooi zwart
afhangend haar en heldere groote kijkers, zat lusteloos bij de tafel,
met een boek vóor zich. Ze las veel: vaak ook haar eenige troost,
waar haar vader zoo dikwijls ongestoord werken wilde, en haar
moeder òf uithuizig, [27]òf aan haar toilet, òf op andere wijze „bezig”
was en „geen tijd” had.
Het meisje had spoedig gezien dat er wat haperde: Mama was uit
haar humeur, en dan zweeg ze maar.
De lamp was aan in de smaakvol ingerichte huiskamer. Paula

voorzag een lang samenzijn met Didi, en in de gemoedsstemming
waarin zij verkeerde, hinderde haar het gezelschap. Ze kwam op
een inval: Larsen was dol op zijn dochtertje, dat wist ze, en was nu
zeker niet aan ’t werk: ’t kind zou hem afleiden, zijn teedere
gevoelens wakker roepen, hem gunstiger stemmen ook tegenover
de moeder.
„Kom, Didi, ga maar naar boven, naar vader. Neem je boek mee, als
je wil. Vader werkt nu toch niet.”
„Vader” en „moeder” waren de door Paula ingevoerde benamingen,

waarmee het kind haar ouders toesprak en over hen sprak: dat was
’t nieuwste. Bij alle deftige families was dat zoo; want Papa en Mama
begon meer en meer „burgerlijk” te klinken: dat zeiden zoo alle
kinderen tegenwoordig bij bakker en kruidenier.
’t Kind gehoorzaamde zwijgend. Ze ging graag naar haar vader, en

het bijzijn van haar ontstemde, knorrige moeder had niets om haar te
weerhouden.
Didi opende zacht de deur der studeerkamer.
Ze vond haar vader op en neer stappend, met zware tred en

gebogen hoofd. [28]
Hij zag haar eerst niet.
„O, kindje!” riep hij opschrikkend, toen ze hem bij een arm nam en
lachend tot hem opkeek.
Hartstochtelijk nam hij haar om ’t middel, en kuste haar herhaaldelijk.

Wat had vader toch? Zoo iets deed hij zoo zelden!
„Ik kom wat bij je zitten, mag dat?”
Ook het gebruik van „jij en jou” was op Paula’s wensch tusschen
kind en ouders ingevoerd.
„Zeker, lieveling.”
Hij trok haar met zich mee naar de sofa, en daar zetten ze zich naast
elkaar neer.
„Heeft vader ’t niet druk van avond?” vroeg Didi met eigenaardige
stembuiging, waaruit verwondering sprak.
„Nee, mijn kindje.”
„En komt moeder ook niet boven thee drinken?”
„Nee.”
„Waarom niet? Moeder zei ’t toch van middag aan tafel.…”
„Ze heeft hoofdpijn—ze wil liever alleen zitten.”
„O,” en ’t lieve ernstige kopje keek peinzend.
Voor Larsen was de verschijning van zijn innig geliefd kind een ware
lafenis. Zijn heele ziel hing thans aan haar.
In de verbijstering van zijn plotseling veranderd levenslot had de

gedachte aan wat er van haar worden [29]zou, wanneer het tot een
echtscheiding kwam, hem nog niet verontrust. ’t Was alsof het voor
hem vanzelf sprak dat dan Didi en hij bijeen zouden blijven. Didi was
veel meer z ĳ n kind dan ’t hare, o, veel, veel meer! Ook thans, nu hij
haar weer vóor zich zag, scheen het dat een scheiding nooit
tusschen hem en zijn kind eenige verwijdering zou kunnen brengen:
Neen, hij dacht zelfs niet aan ’t vraagstuk, dat hem later zou
kwellen.…
’t Begon donker te worden op die herfstavond. Om zeven uur was

anders ’t licht op in Larsen’s studeerkamer, als hij daar zat, en dat
deed hij meestal. Eerst tegen tien placht hij beneden te komen voor
een „boterhammetje” en een praatje met zijn vrouw. Klokke half
twaalf was bedtijd, waar zelden van afgeweken werd. Paula noemde
deze geregelde leefwijze, die zich bij Larsen in zijn meeste
dagelijksche handelingen openbaarde „een domme machinegang”.
Haar levendige natuur hield van afwisseling en ongestadigheid.
De zware gordijnen in Larsen’s studeerkamer—donkergroen als ’t

heele meubilair—de stijve rijen donkere boeken langs bijna drie
wanden, de zware stoelen en zijn massieve, groote schrijftafel, alles
gaf aan ’t groote vertrek met zijn vrij lage zoldering iets sombers, en
’t was er vroeg duister. Slechts Paula’s smaakvol bureautje brak—bij
licht—de ernst dezer werkplaats des geestes. [30]
Voor Didi had de stilte die er heerschte, bij al die ernst, een groote
aantrekkingskracht. Zij zat er gaarne, en vóor achten was ze er dan
ook dikwijls, soms met, maar liever zonder haar moeder. Larsen
babbelde graag met zijn „kleine meid”, zooals hij haar steeds bleef
noemen, ondanks haar opgeschoten gestalte, die bijna aan zijn
schouder reikte, en, als moeder erbij was, zat zij gewoonlijk stil.
Nu was ’t wat laat, en vader week van zijn gewoonte af. Ze vond het
vreemd, begreep er niets van. En vader was zoo innig, zoo heel
anders dan gewoonlijk. O ja, ze herinnerde zich goed, dat hij eens,
net eens, heel lang geleden, ook zoo lief—nee teeder, meende ze,
want lief was vader altijd—geweest was: dat was toen ze weer voor
’t eerst haar ouders mocht omhelzen na de wekenlange afzondering
toen ze diphteritis had. Toen was vader net zoo geweest, ja net zoo.
Moeder was dikwijls bizonder druk met kussen en liefkoozen; maar
hoe kwam ’t toch dat ze al die hartstochtelijke aanhalerij zoo weinig
prettig vond, terwijl een tikje op de wang van vader, of een zoentje
op haar voorhoofd van hem, haar altijd opnieuw aangenaam
stemde? Moeder was zoo ongelijk. Soms beknorde ze haar hevig,
zag kort daarna haar overdrijving, soms onrecht, in, en dan draaide
ze ineens om. „Mijn engel, mijn snoes, mijn alles, mijn beestje, mijn
hondje” was ’t dan, [31]en Didi stikte haast onder een overvloed van
kussen en omhelzingen.
Larsen sloeg zijn arm weer om Didi’s middel, en drukte haar tegen
zich aan. Zij vleide haar donkere kopje tegen zijn schouder, innig
gelukkig en toch vreemd te moede.
„Wat is er toch, vadertje?” vroeg ze na een oogenblik, niet langer

weerstand kunnende bieden aan haar nieuwsgierigheid.
Larsen zag niet duidelijk hoe de uitdrukking harer oogen was, toen
ze dat zeide. Anders had hij bespeurd hoe er iets van ondeugende
plaagzucht in lag, vermengd met een beetje bezorgdheid tevens.
Haar vraag deed hem aan ’t laatste alleen denken, en al de ellende

van eenige oogenblikken te voren overstelpte hem opeens weer. Hij
besefte voor ’t eerst welke schrikkelijke dingen ook zijn vaderhart
bedreigden, wanneer hij en Paula.…
„Hoe bedoel je dat, kindlief?” vroeg hij op zijn beurt, met moeilijk
bedwongen beving in zijn stem.
„Dat u van avond zóo is.…” Verlegen trok ze haar hoofdje terug.
„Zoo? Hoe, mijn lieveling?”
„Zoo.… zoo.… och, hoe zal ik dat zeggen? zoo bizonder lief!”
Larsen deed alsof hij lachte. O, hij moest zijn droefenis vóor zich
houden.… haar niets laten merken.… [32]Hij was zichzelf zoo weinig
bewust van zijn onmacht tot veinzen.
„Maar, Didi, is je vader dan niet altijd lief?”
„Nou ja.… maar zooals van avond toch niet.…”
Weer vleide ze zich tegen hem aan. Hij drukte haar vast aan zich. Hij
worstelde nog een oogenblik tegen de stroom van droeve
teederheid, die zijn gemoed overstelpte met ongekende kracht. Och,
hij kòn niet, ’t was te machtig.…
Hij antwoordde niet. De duisternis verborg voor Didi’s blikken een

traan, die uit zijn oogen welde.
Ze werd ongerust: Vader had zeker iets, dat hem verdriet deed. Zou
hij ’t voor haar willen weten? Waarom zou ze maar niet ronduit
vragen wat hij had: tegenover haar vader was ze immers nooit
terughoudend!
„Vader,”.… fluisterde ze bijna, met innige vleiing.
„Kind?”
O, nu wist ze ’t zeker: vader schreide bijna.
„Heb je verdriet?”
Weer geen antwoord dan alleen een krampachtig drukken van haar
handje in zijn hand, achter om haar middel heen.
„Wil je ’t me niet zeggen, vadertje?” vleide ’t meisje voort, haar

gezicht vlak bij ’t zijne. Ze zag zijn tranen blinken. Haar hartje zwol
van warm [33]medegevoel, van echt vrouwelijke bezorgdheid, van
troostbehoefte.
„Hou je veel van je vader, mijn kindje?” vroeg hij, niet lettende op wat
ze gezegd had.
„Natuurlijk, heel veel.… Maar.…?”
„Niets, je moet ’t me alleen oprecht en eerlijk zeggen.”
„Maar, vader.…!”
„Zou je ’t vreeselijk vinden als.… ik doodging.… of zoo?”
„Waarom vraagt u toch zulke dingen? Maar ’t spreekt immers van

zelf, dat ik.… dat ik ’t vreeselijk zou vinden. O, vader, ik wil er niet
aan denken.…”
En weer kroop ze dichter op hem, drukte zijn arm, in angstige

verbazing.
„En moeder?” vroeg Larsen na een oogenblik zwijgens.
„Of ik van haar hoû? Dat weet u toch ook wel.… Zeker, natuurlijk.…
een kind houdt altijd van zijn moeder.…”
Zij was een oogenblik verlegen, zocht naar woorden.
’t Verschil in de beide liefdesbetuigingen viel Larsen vreemd op. Zou

’t kind werkelijk zooveel minder van haar moeder houden dan van
hem? ’t Was hem nooit op die wijze klaar geworden, al hadden vage
vermoedens soms zijn vaderlijke eigenliefde gestreeld. [34]
„Nu?” zeide hij uitvorschend.
„Ik hoû toch meer van jou, vadertje.…”

„Och, dat zeg je nu maar zoo, omdat je denkt, dat ik verdriet heb.…”
„Och, wel nee.… nee, heusch.… ik hoû meer, veel meer van jou”.…
’t Kwam er vreemd uit, met overtuiging, maar op een toon als ware
zij zelve verbaasd deze verhouding waar te nemen, ’t verschil
duidelijk uit te spreken. Ze had er nooit over nagedacht, al had ze ’t
vaak, o zoo vaak gevoeld.…
„Maar,” ging ze aarzelend voort, „waarom vraag je dat alles toch? Je

gaat toch niet van me weg.… en je bent toch ook niet ziek, wel?”
„Goddank niet, mijn lieveling,” antwoordde hij in gedachten

verzonken. „Ik vraag het.… zoo maar.… omdat ik ’t weten wilde.”
„Och kom! En waarom ben je dan zoo bedroefd?”
Zijn hart drong tot spreken. Maar hoe kòn hij haar zeggen wat hem
die vragen had ingegeven? Hij verzon een leugentje, blij dat het
vrijwel geheel donker in de kamer was, en zij de uitdrukking van zijn
gezicht niet kon zien.
„Ik denk aan klein broertje.…” zeide hij.
Er was een kern van waarheid in de uitvlucht.
„O,” zei Didi, en zweeg even. Ze drukte weer zijn arm, en, bijna
fluisterend: „Arm vadertje.…” [35]
Toch was haar groote onrust eenigermate bedaard. Iets bleef bij
haar hangen: de opgegeven reden scheen haar niet bevredigend.
En hij, meenend nog iets te moeten zeggen, liet volgen:
„Ja, mijn kindje, als ouders zooveel verdriet hebben om een kind dat
sterft.… dan denken ze.… verwachten ze, dat een kind nog grooter
verdriet heeft, als vader of moeder heengaat.…”
Hij zuchtte zwaar en rees op. „Wacht, ik zal de lamp aansteken,”

zeide hij, om iets te zeggen.
Juist klopte de meid, en bracht twee kopjes thee: ’t groote waaruit hij
placht te drinken en een kleine voor Didi.
„Zit u nog in ’t donker?” zei de binnentredende verbaasd. „Zal ik

even licht maken?”
„Goed.”
Larsen zette zich weer op de sofa.
„Waar heb je je boek gelegd, Didi?” vroeg hij. „Ik zag je met een
boek binnenkomen.…”
„Hier, vader.” En, verwonderd, trad ze naar het bureautje, waarop ze

haar boek bij ’t binnenkomen had neergelegd.
„Ga nu wat lezen. Hier heb je je thee.”
„Goed, vader.”
’t Kind gehoorzaamde, en liet haar vader aan zijn gepeins over. [36]
In de stilte, die nu volgde, was ’t of hun gedachten nog

gemeenschap hadden: zij achteloos bij haar boek zittende, lezende
zonder goed te verstaan, dacht aan „vadertje, die verdriet had,” hij
aan de schipbreuk van zijn huiselijk leven.
O, hij moest en zou spoedig zekerheid hebben. Zou hij misschien

toch afstand moeten doen van ’t samenzijn met zijn kind, en alleen
tot die prijs van Paula kunnen scheiden? Maar dat zou hij niet willen,
niet kunnen dragen.… Dan om ’t kind van scheiding afzien? Een hel
in huis hebben, ook al toonde Paula zich de boetvaardige en
berouwvolle.… dat was even onduldbaar! O, als er geen keuze was
dan die, dan zou hij ’t besterven of krankzinnig worden. Hoe zou hij ’t
kunnen aanzien, dat zijn kind de verwijdering, de onhuichelbare
verkoeling zijner liefde voor haar moeder, opmerkte en eronder
leed? Hij zou ’t immers niet verborgen kunnen houden. En was ’t dat
nog maar alleen! En in ’t andere geval: hoe zou hij in eenzaamheid
zijn smart kunnen dragen, zonder zijn aangebeden kind, thans ’t
eenige schepsel ter wereld dat hem zou kunnen troosten en door
haar liefde zijn vreeselijk gemis wat vergoeden? Hij had niemand
buiten haar: zijn ouders waren lang gestorven, hij had geen broeders
of zusters, terwijl zijn schoonmoeder natuurlijk haar partij zou kiezen.
Want die zou immers nooit vernemen, [37]wat de reden hunner
plotselinge scheiding was! Wie wist ervan, wie zou er ooit van weten,
als hij er niet over sprak? Nee, hij zou zwijgen als ’t graf, dan
alleen.… tegen zijn kind. Haar zou hij eenmaal, in later jaren, alles
openbaren. En ook bij haar zou ’t geheim veilig wezen.… En de
rechter? Ook die niet.… Om die reden, om haar ontrouw, mocht hij
geen scheiding vragen. Er was immers wel een andere weg. Welke
wist hij niet recht. O, maar die moest er zijn! Men kon immers
echtscheiding krijgen waar ’t noodig was.…
In zijn onwetendheid omtrent de burgerlijke wetten op dit punt stelde

hij zich de zaak als vrij gemakkelijk voor. O, ja zeker, er was wel wat
op te vinden, stellig, zeker.… Alleen ’t kind, dat moest hij zeker
weten: daaromtrent was hij nog niet gerust.
Er kwamen zooveel echtscheidingen voor. Onder zijn kennissen

waren er die zoo iets doorgemaakt hadden. Dat was schijnbaar zoo
vlot gegaan. Zeker niet wegens overspel of iets van dien aard.…
Larsen’s onbekendheid met de menschelijke maatschappij in haar

ruwe naaktheid, was al even groot als zijn onwetendheid in zake

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Indicate whether the statement is true or false.

41. A tax-free corporate reorganization can be utilized to:

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period of time to complete.

52. Which of the following statements is true regarding “Type A” reorganizations?

53. Which of the following statements regarding “Type B” reorganizations is true?

58. Which of the following statements is false?

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75. Which of the following statements is true?

Enter the appropriate word(s) to complete the statement.

81. Changing from an S corporation to a C corporation is a Type ____________________ reorganization.

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95. Carries over to new corporations in a split-up reorganization.

96. A 50 percentage-point change in ownership that occurs because of tax-free reorganization.

99. Rate used to determine the § 382 limitation.

103. Requires at least a 40% carryover ownership by target shareholders.

What type of reorganization is effected in each of the following independent transactions?

How are the Coffee shareholders taxed on the distribution?

b. Provide a diagram of the reorganization you suggest.

b. Draw a diagram of the solution you suggested in part a.

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82. boot, recognized, not recognized

83. boot, parent-subsidiary

84. divisive "D", five

85. continuity of business enterprise, continuity of interest

86. Section 382 limitation

89. Type C, acquiring

90. Type A, 100

91. Boot, dividends, capital gain

92. step transaction, sound business purpose

94. capital loss, built-in ordinary loss, NOL

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Keith $180,000 $48,000 $90,000 $132,000

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Realized Gain/ Recognized Gain/ Postponed Gain/ Adjusted Basis

Allen $ 364,000 $ –0– ($16,000) $338,000

a. A divisive “Type D” split-up reorganization will meet the needs of the

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126. The stock requirements for § 368 reorganizations are as follows.

Name: Class: Date:

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Verschrikt keek hij op, als plotseling ontwakend.

„Wat is er?” vroeg ze verwonderd. Ben je hier in slaap gevallen?.…

God, hoe kwam dat ongelukkige ding hier?!

Eén oogenblik stond ze in beraad. Zou ze ontkennen, en er iets op

En snikkend wierp ze zich voorover op een kleine sofa, die bij ’t

Ze hield even op, en wachtte.

Paula ging voort.

„O, je antwoordt niet.… Je Paula is niets meer in je oogen. Je zult