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Question;576. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question PR;Ali is in the 35% tax bracket. He acquired 1,000 shares of stock in Cardinal;Corporation seven years ago for $100 a share. In the current year, Cardinal;Corporation (E & P of $1 million) redeems all of his shares for $300,000.;What are the tax consequences to Ali if;a.;The;redemption qualifies for sale or exchange treatment, and Ali has no other;transactions in the current year involving capital assets?;b.;The;redemption does not qualify for sale or exchange treatment?;577. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 91;Jill has a capital loss carryover in the current tax year of $80,000. She owns;1,000 shares of stock in Black Corporation which she purchased nine years ago;for $75 per share. In the current year, Black Corporation (E & P of;$800,000) redeems all of her shares for $600,000. Jill is in the 35% tax;bracket. What are the tax consequences to Jill if;a.;The;redemption qualifies for sale or exchange treatment, and Jill has no other;transactions in the current year involving capital assets?;b.;The;redemption does not qualify for sale or exchange treatment?;578. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 92;Hawk Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares;Russell owns 600 shares, Velvet Partnership owns 300 shares, and Yellow;Corporation owns 400 shares. Marina and Russell, unrelated individuals, are;equal partners of Velvet Partnership. Marina owns 25% of the stock in Yellow;Corporation.;a.;Applying the;? 318 stock attribution rules, determine how many shares in Hawk Corporation;each shareholder owns, directly and indirectly;Marina;Russell;Velvet;Partnership;Yellow;Corporation;b.;Assume;instead, that Marina owns 75% of Yellow Corporation. How many shares does;Marina own, directly and indirectly, in Hawk Corporation?;579. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 93;Egret Corporation has manufactured recreational vehicles for 8 years. In;addition, for the last 3 years, Egret has operated a separate division that;sells bicycle equipment. Francis, an individual, and Loon Corporation each;acquired 500 shares of stock in Egret (basis of $2,000 per share) 10 years ago.;In the current year, the bicycle equipment division is entirely destroyed by;fire. Egret Corporation decides to discontinue the business and distributes pro;rata all of the $5 million of insurance proceeds collected as a result of the;fire to Francis and Loon Corporation in redemption of 200 shares of stock from;each shareholder. Determine the tax consequences of the stock redemption to;Egret Corporation (E & P of $6 million), to Francis, and to Loon;Corporation.;Corporation)].;580. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 94;Sam?s gross estate includes stock in Tern Corporation and Wren Corporation;valued at $1.4 million and $980,000, respectively. At the time of Sam?s death;in 2011, the stock represented 22% of Tern?s outstanding stock and 27% of;Wren?s outstanding stock. Sam?s adjusted gross estate equals $6,500,000. Death;taxes and funeral and administration expenses for Sam?s estate total $980,000.;Sam had a basis of $350,000 in the Tern stock and $190,000 in the Wren stock at;the time of his death. None of the beneficiaries of Sam?s estate own (directly;or indirectly) any stock in Tern Corporation, but some of the beneficiaries own;stock of Wren Corporation. Consider the following independent questions.;a.;What are the;tax consequences to the estate if all of its Wren stock is redeemed by Wren;Corporation for $980,000?;b.;What are the;tax consequences to the estate if all of its Tern stock is redeemed by Tern;Corporation for $1.4 million?;581. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 95;The gross estate of Raul, decedent who died in 2011, includes 700 shares of;stock of Orange Corporation (basis to Raul of $400,000, fair market value on;date of death of $3 million). The estate will incur $2 million of death taxes;and funeral and administration expenses, and the adjusted gross estate is $8;million. Denise, Raul?s daughter and sole heir of his estate, owns the;remaining 300 shares of Orange Corporation?s (1,000) shares outstanding. In the;current year, Orange (E & P of $4 million) redeems all of the estate?s 700;shares for $3 million. What are the tax consequences of the redemption to;Raul?s estate?;582. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 96;Ivory Corporation (E & P of $650,000) has 1,000 shares of common stock;outstanding owned by unrelated parties as follows: Veronica, 500 shares, and;Tommie, 500 shares. Veronica and Tommie each paid $125 per share for the Ivory;stock 12 years ago. In May of the current year, Ivory distributes securities;held as an investment (basis of $140,000, fair market value of $250,000) to;Veronica in redemption of 200 of her shares.;a.;What are the;tax results to Veronica on the redemption of her Ivory stock?;b.;What are the;tax results to Ivory Corporation on the distribution of the securities?;583. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 97;Fred is the sole shareholder of Puce Corporation, having a basis of $90,000 in;1,000 shares of Puce common stock. Last year, Puce (E & P of $500,000);issued a dividend of 2,000 shares of preferred stock to Fred. On the date of;distribution, the fair market values per share of the common and preferred;stocks were $160 and $20, respectively. In the current year, Puce (E & P of;$720,000) redeems all of Fred?s preferred stock for its fair market value of;$40,000.;a.;What are the;tax consequences of the preferred stock dividend to Fred?;b.;What are the;tax consequences of the stock redemption to Fred?;c.;What are the;tax consequences of the stock redemption to Puce?;584. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 98;The stock in Camel Corporation is owned by Albert and Tomoko, who are;unrelated. Albert owns 30% and Tomoko owns 70% of the stock in Camel;Corporation. All of Camel Corporation?s assets were acquired by purchase. The;following assets are to be distributed in complete liquidation of Camel;Corporation;Adjusted;Fair Market;Basis;Value;Cash;$400,000;$400,000;Inventory;80,000;100,000;Equipment;230,000;200,000;Land;390,000;300,000;a.;What gain or;loss would Camel Corporation recognize if it distributes the land to Albert;and the cash, inventory, and equipment to Tomoko?;b.;What gain or;loss would Camel Corporation recognize if it distributes the inventory and;equipment to Albert and the cash and land to Tomoko?;585. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 99;Mary and Jane, unrelated taxpayers, own Gray Corporation?s stock equally. One;year before the complete liquidation of Gray, Mary transfers land (basis of;$420,000, fair market value of $350,000) to Gray Corporation as a contribution;to capital. Assume that Mary also contributed other property in the same;transaction having a basis of $20,000 and fair market value of $95,000. In;liquidation, Gray distributes the land to Jane. At the time of the liquidation;the land is worth $290,000.;a.;How much;loss may Gray Corporation recognize on the distribution of the land to Jane?;b.;Assume that;the transfer of land to Gray Corporation was made so that the corporation;could subdivide the land and build residential housing. However, a subsequent;deterioration of the housing market forced Gray Corporation to abandon its;plans. What amount of loss may Gray Corporation recognize on the distribution;of the land to Jane?;586. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question100;After a complete liquidation has been adopted, Wren Corporation sells its only;asset, unimproved land (basis of $200,000) held as an investment. The land is;sold to Seth (an unrelated party) for $500,000. Under the terms of the sale;Wren Corporation receives cash of $50,000 and Seth?s notes for the balance of;$450,000. The notes are payable over the succeeding 5 years ($90,000 per year);and carry an appropriate rate of interest. Immediately after the sale, Wren;Corporation distributes the cash and notes to Adam, the sole shareholder of;Wren. Adam has an adjusted basis of $80,000 in the Wren stock. The installment;notes have a value equal to their face amount of $450,000.;a.;How will;Wren Corporation be taxed on the distribution?;b.;How will Adam;be taxed on his receipt of the cash and notes?;587. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question101;The stock of Tan Corporation (E & P of $1.3 million) is owned as follows;90% by Egret Corporation (basis of $520,000), and 10% by Zoe (basis of;$55,000). Both shareholders acquired their shares in Tan more than six years;ago. In the current year, Tan Corporation liquidates and distributes land (fair;market value of $1.1 million, basis of $750,000) and equipment (fair market;value of $700,000, basis of $410,000) to Egret Corporation, and securities;(fair market value of $200,000, basis of $150,000) to Zoe. What are the tax;consequences of these distributions to Egret, to Tan, and to Zoe?;588. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question102;On April 16, 2010, Blue Corporation purchased 15% of the Gold Corporation stock;outstanding. Blue Corporation purchased an additional 50% of the stock in Gold;on November 23, 2010, and an additional 20% on May 4, 2011. On September 23;2011, Blue Corporation purchased the remaining 15% of Gold Corporation stock;outstanding.;a.;For purposes;of the ? 338 election, on what date does a qualified stock purchase occur?;b.;What is the;due date for making the ? 338 election?;589. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question ES;Explain the stock attribution rules that apply in the case of stock;redemptions.;590. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question103;What are the requirements that must be satisfied for a distribution to qualify;under ? 302(b)(2) as a disproportionate redemption?;591. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question104;Explain the requirements for waiving the family attribution rules in the case;of complete termination redemptions.;592. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question105;The partial liquidation rules provide a unique opportunity for a corporation to;contract its business enterprises in a manner that produces favorable tax;results for its shareholders. Discuss the requirements for a partial;liquidation and the resulting tax consequences to the shareholders.;593. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question106;When is a redemption to pay death taxes under ? 303 most advantageous?;594. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question107;What are the tax consequences of a qualifying stock redemption to the;distributing corporation?;595. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question108;Discuss the tax consequences associated with a sale of ? 306 stock. Can the;306 rules have a harsher tax result than if the corporation had distributed a;taxable dividend in the first place?;596. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question109;The text discusses four different limitations on loss recognition by;liquidating corporations. Provide a brief description of each of these loss limitations.;597. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question110;What are the tax consequences of a ? 332 liquidation to the parent corporation;subsidiary corporation, and minority shareholder?;598. CHAPTER;6?CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question111;Describe the requirements for and tax consequences of a ? 338 election.

 

Paper#59274 | Written in 18-Jul-2015

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