1.

Merchant Corporation owned 100% of Craft Corporation since 2000. Merchant Corporations basis in their Craft stock was $200,000. Merchant Corporation had an NOL of $60,000 and E&P of $20,000. Craft Corporation looks as follows on August 1, 2021.

Cost Basis FMV___

Machinery $50,000 $40,000 $45,000

Building $100,000 $90,000 $180,000

Inventory $100,000 $100,000 $200,000

Total $250,000 $230,000 $425,000

Merchant Corporation decides to liquidate Craft Corporation in 2021.

Merchant Corporations basis of $200,000 would disappear. (true or False)

2.

Answer True or False to the following:

Merchant Corporation owned 100% of Craft Corporation since 2000. Merchant Corporations basis in their Craft stock was $200,000. Merchant Corporation had an NOL of $60,000 and E&P of $20,000. Craft Corporation looks as follows on August 1, 2021.

Cost Basis FMV___

Machinery $50,000 $40,000 $45,000

Building $100,000 $90,000 $180,000

Inventory $100,000 $100,000 $200,000

Total $250,000 $230,000 $425,000

Merchant Corporation decides to liquidate Craft Corporation in 2021.

Merchant Corporation would have a total basis in the Craft assets of $230,000.

3.

Answer True or False to the following:

Merchant Corporation owned 100% of Craft Corporation since 2000. Merchant Corporations basis in their Craft stock was $200,000. Merchant Corporation had an NOL of $60,000 and E&P of $20,000. Craft Corporation looks as follows on August 1, 2021.

Cost Basis FMV___

Machinery $50,000 $40,000 $45,000

Building $100,000 $90,000 $180,000

Inventory $100,000 $100,000 $200,000

Total $250,000 $230,000 $425,000

Merchant Corporation decides to liquidate Craft Corporation in 2021.

Potential recapture would pass to Merchant Corporation.