Chapter 20 Discussion Question 7 Rose Corporation stock is owned 85% by Pheasant Corporation and 15% by Crystal. In a liquidation subject to section 332, Rose distributes assets to Pheasant and Crystal in accordance with their ownership interests. Discuss the tax consequences of the liquidation for Rose, Pheasant, and Crystal. Chapter 20 Discussion Question 9 Condor Corporation pays $750,000 for 100% of the stock in Dove Corporation. Dove has a basis of $900,000 in its assets and E&P of $310,000. If Condor liquidates Dove and makes no special election, what are the tax consequences to Condor and to Dove? Chapter 20 Discussion Question 15 Five years ago, Mervin purchased 1,000 shares of Fern Corporation, which represents 20% of Fern?s outstanding stock. As part of a restructuring agreement between Fern and Ivy Corporation, Mervin receives 10% of Ivy?s stock (valued at $100,000) and a $30,000 bond in exchange for all of his Fern stock. Fern is liquidated after the restructuring. What are the tax issues regarding this transaction? Chapter 20 Problem 16 The stock of Hawk Corporation is owned equally by three sisters, Michele, Melanie, and Miranda. Hawk owns land (basis of $250,000, fair market value of $210,000) that it has held for investment for eight years. When Michele?s basis in her stock is $225,000, Hawk distributes the land to her in exchange for all of her shares. What are the tax consequences for both Hawk and Michele if the distribution is: a. A qualifying stock redemption? b. A liquidating distribution? Chapter 20 Problem 17 Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land held for three years as an investment (adjusted basis of $400,000, fair market value of $600,000). The land is subject to a liability of $300,000. a. What are the tax consequences to Oriole Corporation on the distribution of the land? b. If the land is, instead, subject to a liability of $700,000, what are the tax consequences to Oriole on the distribution? Chapter 20 Problem 24 The stock of Magenta Corporation is owned by Fuchsia Corporation (95%) and Marta (5%). Magenta is liquidated on September 2, 2009, pursuant to a plan of liquidation adopted earlier in the same year. In the liquidation, Magenta distributes various assets worth $2,375,000 (basis of $1.2 million) to Fuchsia (basis of $1.6 million in Magenta stock) and a parcel of land worth $125,000 (basis of $105,000) to Marta (basis of $40,000 in Magenta stock). Assuming the section 338 election is not made, what are the tax consequences of the liquidation to Magenta, Fuchsia, and Marta? Chapter 20 Problem 25 Orange Corporation purchased bonds (basis of $95,000) of its wholly owned subsidiary, Green Corporation, at a discount. Upon liquidation of Green pursuant to section 332, Orange receives payment in the form of land worth $100,000, the face amount of the bonds. Green had a basis of $70,000 in the land. What are the tax consequences of this land transfer to Green Corporation and to Orange Corporation?
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