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1. Falcon Corporation is owned 90% by Canary Corpo...

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Question

1. Falcon Corporation is owned 90% by Canary Corporation. The parent is contemplating a liquidation of Falcon Corporation and the acquisition of its assets. Canary Corporation purchased the Falcon stock from Falcon?s two individual shareholders a month ago on January 3, 2008, for $400,000. The financial statements of Falcon Corporation, as of January 3, 2008, reflect the following: Basis to Falcon Corporation Fair Market Value Assets Cash $40,000 $40,000 Inventory $80,000 $60,000 Accounts Receivable $160,000 $100,000 Equipment $400,000 $320,000 Land $520,000 $280,000 $1,200,000 $800,000 Liabilities and Shareholders' Equity Accounts Payable $120,000 $120,000 Mortgages Payable $200,000 $200,000 Common Stock $1,000,000 $480,000 Retained Earnings ($120,000) $1,200,000 $800,000 2. a. Can Canary Corporation make a ? 338 election? b. Assuming Canary can make a ? 338 election, is such an election feasible?

 

Paper#7449 | Written in 18-Jul-2015

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