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Comprehensive Problem 16-54: Parent Corporation p...




Comprehensive Problem 16-54: Parent Corporation purchased 75 percent of Subsidiary Corporation seven years ago; Subsidiary?s current balance sheet shows the following figures: Basis Value Demand Deposit $20,000 $20,000 IBM Stock $30,000 $50,000 Parking Lot $5,000 $30,000 Building 0 $100,000 Mortgage ($15,000) ($15,000) Subsidiary has a net operating loss carryover of $7,000 and earnings and profits of $22,000. Subsidiary redeems Roy Ramblers 25 percent stock interest in exchange for the IBM stock. Subsidiary then adopts a plan of complete liquidation and distributes its assets to Parent in complete liquidation. a. What is the tax result to Roy? b. Does subsidiary recognize any gain on the redemption or the liquidation? c. What are Parent?s bases for the assets received? d. What happens to Subsidiary?s NOL and E&P? Comprehensive Problem 16-55: Mini-Skits Ltd., owned by one shareholder, owns one asset, a building worth $100,000 with a zero basis. The shareholder?s stock basis is $20,000. A plan of complete liquidation is adopted. What are the tax consequences to both parties in each of the following cases? a. The building is deeded to the shareholder, Bill Jones, who is taxed under Code Sec. 331. b. The building is sold for an installment note that is distributed to Bill. c. Mini-Skirts Ltd. Sells the building and presents a cashier?s check for $100,000 to Bill. d. The building is deeded to the shareholder, Bill Inc., in a Code Sec. 332 liquidation. Comprehensive Problem 17-54: Label the following transactions: a. A Nevada corporation formed a corporation in Florida and transferred all assets to it for 100 percent of its stock. It then distributed the stock to its shareholders in cancellation of their Nevada corporation stock and was dissolved. b. ABC Corp. acquired all the stock of MNO Corp. for its convertible bonds. All MNO assets were transferred to ABC, whereupon MNO was dissolved. c. A corporation issues $30,000 worth of its own voting stock to retire some of its outstanding bonds with a principle amount of $40,000. d. Convertible preferred stock is converted into common stock of the issuing corporation. e. A corporation incorporates a division and distributes the shares received pro rata to its shareholders. f. A corporation distributes preferred stock for each 10 shares of common stock outstanding. Research Problem 17-55: Mr. Aslak owns all the stock in Shoes Inc., which owns 85 percent of Skiing Inc. Ms. Quinn, the manager of Skiing, wishes to share in the profits of the prosperous firm by buying 5 percent of its stock. Shoes Inc. then distributes its stock interest in Skiing to Ms. Quinn for $15,000. Assume the sake of stock to a key employee has a valid business and corporate purpose. How would the IRS view the above transaction?


Paper#4484 | Written in 18-Jul-2015

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