Exam 6: Corporate Liquidating Distributions

Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock.Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000.Under a plan of complete liquidation,Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000.Ball and Jack's recognized gains on the liquidation are:

What is the IRS's position regarding whether a liquidating transaction will be considered open or closed?

Jack Corporation is owned 75% by Sherri and 25% by Mark.Sherri and Mark have $125,000 and $50,000 bases in their stock,respectively.Jack Corporation adopts a plan of liquidation on March 1.On April 12,Sherri receives the following property as a liquidating distribution: cash of $30,000; land,$125,000 FMV; and 150 shares of Green Corporation stock,$30,000 FMV.The land is subject to a $20,000 mortgage.On the same date,Mark receives $10,000 FMV of Green stock (50 shares)and cash of $45,000 as a liquidating distribution.The land has a basis of $50,000 and the stock has a basis of $70,000 in Jack Corporation's hands.Both are capital assets to Jack Corporation and have been held for a number of years. a)What is the amount and character of Jack Corporation's recognized gain or loss on the liquidating distributions? b)What are the amounts and characters of Sherri and Mark's recognized gains or losses? c)What are the bases of the land and stock to Sherri and Mark?

Barnett Corporation owns an office building that cost $900,000.Barnett has taken $600,000 of depreciation on the building.The property is subject to a $600,000 mortgage.The office building has a current FMV of $400,000.Barnett Corporation is liquidated and the office building is distributed to a single individual shareholder who assumes the mortgage.Barnett Corporation must recognize

Cowboy Corporation owns 90% of the single class of stock in Doggie Corporation.The other 10% is owned by Miguel,an individual.Cowboy's basis in its Doggie Corporation stock is $100,000 and Miguel's basis is $50,000.Doggie Corporation distributes property having an adjusted basis of $150,000 and an FMV of $500,000 to Cowboy Corporation,and $60,000 of money to Miguel as a liquidating distribution.Doggie and Cowboy Corporations must recognize gain of:

Identify which of the following statements is true.

Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation.In addition,Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis.Gary's basis in the Key stock (a capital asset)surrendered is $120,000.If Gary relies on the open transaction doctrine,at the liquidation date he must recognize a

A plan of liquidation must be reduced to writing in order to be accepted by the Internal Revenue Service.

Generally,a corporation recognizes a gain,but not a loss,on a liquidating distribution.

For that following set of facts,what are the tax consequences to Parent Corporation,Subsidiary Corporation,and a Subsidiary Corporation shareholder,Melisa? Parent Corporation owns 80% of Subsidiary Corporation's stock.Melisa owns the remaining 20% of the Subsidiary stock.Parent and Melisa's stock have adjusted bases of $100,000 and $25,000,respectively,for their Subsidiary stock.Subsidiary distributes land having a $125,000 adjusted basis and a $200,000 FMV to Parent and $50,000 in cash to Melisa.

Identify which of the following statements is false.

Carly owns 25% of Base Corporation's single class of stock and Premier Corporation owns the remaining 75%.Carly's basis in the Base stock is $200,000 and Premier Corporation's basis in the Base stock is $600,000.Carly receives property with a $175,000 adjusted basis and a $250,000 FMV and Premier Corporation receives property with a $600,000 adjusted basis and a $750,000 FMV in complete liquidation of Base Corporation.All of Base's cash is used to pay its liabilities.Which of following statements is correct concerning the tax effects of the liquidation?

Dexer Corporation is owned 70% by Amy and 30% by Brad.Dexer Corporation owns Eagle Corporation stock with a $50,000 adjusted basis and a $30,000 FMV.The stock is not disqualified property.As part of a complete liquidation,the Eagle Corporation stock is distributed to Amy.Amy's basis in her Dexer stock is $40,000.Dexer Corporation will recognize

Under a plan of complete liquidation,Key Corporation distributes land (not a disqualified property)with an adjusted basis of $410,000 and an FMV of $300,000 for all Sharon's stock.Sharon's basis in her 5% interest in the Key stock is $250,000.Find Sharon's basis in the land and Key Corporation's recognized gain or loss.

Market Corporation owns 100% of Subsidiary Corporation's stock.Market Corporation completely liquidates Subsidiary Corporation,receiving land with a $400,000 adjusted basis and a $500,000 FMV in exchange for Subsidiary stock,which has a $300,000 adjusted basis.Market Corporation has a basis in the land of

Homewood Corporation adopts a plan of liquidation on June 15 and shortly thereafter sells a parcel of land on which it realizes a $50,000 gain (excluding the effects of a $5,000 sales commission).Homewood pays its legal counsel $2,000 to draft the plan of liquidation.The accountant fees for the liquidation are $1,000,which are also paid during the year.What is Homewood Corporation's realized gain on the sale of land and deductible liquidation expenses?

Hope Corporation was liquidated four years ago.Teresa reported a $40,000 long-term capital gain due to the liquidation on her individual tax return.This year,Teresa pays $6,000 as part of the settlement of a lawsuit against Hope.Due to the $6,000 payment,Teresa recognizes a

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

In a Sec.332 liquidation,what bases do both the parent and minority shareholders take in the assets received?

What are the tax consequences to Parent Corporation when Parent Corporation,which owns 75% of Subsidiary Corporation's single class of stock,purchases for cash the remaining 25% of the Subsidiary stock from three individual shareholders pursuant to a tender offer? Three months later as part of an approved plan of liquidation,Subsidiary's assets all distributed to Parent Corporation in exchange for all of Subsidiary's outstanding stock.