I:16-59 Corporate Liquidation. Several years ago, Tampa Corporation acquired 100% of Union Corporation stock for $1,000,000. In the current year, Tampa liquidates Union and receives all of its assets and liabilities. Tampa continues to operate Union as a division. On the liquidation date, the basis and FMV of Union’s assets are $700,000 and $2,500,000, respectively. Union also has $100,000 of liabilities that were owed to third parties and E&P of $125,000 on the liquidation date.

a. How much gain or loss does Union recognize as a result of the liquidation?

b. What is Tampa’s basis in the Union assets?

c. What Union tax attributes (if any) carry over to Tampa?

TA X S T R A T E G Y A N D C R I T I C A L T H I N K I N G P R O B L E M S