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Please use the following facts to respond to the r...

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Please use the following facts to respond to the related questions. Acquiring Corporation acquires all of the assets of Target Corporation in exchange for $3,000,000 of Acquiring common stock, and the assumption of $2,000,000 of Target?s liabilities. The assets had a $2,300,000 adjusted basis to Target. Target?s sole shareholder, Paula, had a $1,000,000 adjusted basis for her stock. Target Corporation had $600,000 of E&P on the acquisition date. Paula receives all of the Acquiring common stock in liquidation of Target. (See pages C7-11 through C7-14 and C7-24.) A. What are the tax consequences of the acquisition to Acquiring Corporation? _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ B. What are the tax consequences of the acquisition to Target Corporation? _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ C. What are the tax consequences of the acquisition to Paula? _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ 3. Please use the following facts to respond to the related questions. Parent Corporation purchases all of Target Corporation?s stock for $200,000 and makes a deemed liquidation election. Target Corporation has the following assets: Adjusted Basis FMV Class I $55,000 $ 55,000 Class II $40,000 $ 60,000 Class V $70,000 $100,000 The Class V assets are subject to a $20,000 liability. Assume a 34% corporate tax rate. (See pages C7-5 through C7-10.) A. What is the adjusted grossed-up basis of Target Corporation?s stock? ______________________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________

 

Paper#9357 | Written in 18-Jul-2015

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