16-21 PROBLEMS Baretta Corp. owns 100 percent of the stock 30. A cash-method corporation adopts a plan of PPK Corp, and also owns PPK Corp debentures with a face amount (and basis) of following assets to its sharcholders: 27 $200,000. A plan of liquidation is adopted nd PPK is liquidated under Code Sec. 332 of complete liquidation and distributes the A truck that was purchased for $25,000, s worth $18,000, and has a basis of Pursuant to the liquidation, PPK distributes inventory with a FMV of $200,000 and a basis of $220,000 in cancellation of the debentures. 11,000. An installment note receivable with a remaining face amount of $20,000, resulting from a sale of a warehouse for How much loss can be recognized by PPK Corp. on the distribution of the $75,000 seven years ago in which the warehouse's basis at the time of sale was inventory to Baretta? $25,000. b. What is Baretta Corp's tax basis for the Accounts receivable of $7,000. inventory received from PPK? 28. Ellen received a liquidating distribution from $13,000. In exchange for her stock, Ellen expensed, worth $350. What gains are recognized by the liquidating Lopas Corp as part of a redemption of all of its stock. Ellen's basis for her Lopas stock was corporation on the distributions in complete liquidation? received property with a S10,000 basis and a $35,000 fair market value that is subject to a $18,000 mortgage, and also received cash of 31. The stock of Richmond Corp. is owned 60 percent by Sid and 40 percent by Mark who are unrelated individuals. During 2016, Sid transferred land (basis of $300,000: FMV of $260.000) as a contribution to the capital of Richmond Corp. During March 2017. Richmond Corp. adopted a plan of liquidation and subsequently made a non pro rata distribution of the land to Mark. At the time of the liquidating distribution, the land had a FMV of $230,000. a. What amount of loss can be recognized $15,000. a. What is Ellen's realized and recognized gain from this complete liquidation? b. What is Ellen's tax basis for the non-cash property he received? 29. Brenda owns 100 percent of Walker Corp. She has a basis for her stock of $20,000. The corporation's only assets are cash of $20,000 and land with a basis of $75,000 and a value of $95,000. Earnings and profits are $125,000. Walker Corp liquidates and distributes its assets to Brenda, whose stock is cancelled. a. What is the gain recognized by Walker by Richmond Corp. on the distribution of land to Mark? What is Mark's tax basis for the land that he received b. Corp.? profits? What is Brenda's basis for the land? What happens to Walker's carnings and gain is recognized by Brenda b. d. 34. Marcia is a 50 percent shareholder Chevez Corp., which is in the progo liquidation. Marcia's basis for b $25,000. Chevez's balance sheeck 32. Alex purchased one thousand shares of Ambrose Corporation stock on March 10, 2016, for $95,000. On August 1, 2017, Alex received the following as a distribution in cancellation of his stock in a complete liquidation of Ambrose: of iqdation is as follows Cash 100 shares of Public Co.20,000 Accounts receivable Basis 32,000 320 Fair Market Value $5,000 200,000 10.0 50,000 30,000 Land Building Building (depreciated straight line) Totals $548,000 $1008 $145,000 Equities Mortgage on real estate Unsecured liabilities What is the amount and character of Alex's recognized gain? What is Alex's basis of property received? When does the holding period for each of the items of property begin? How would your answer to (a) change if Alex had purchased 500 shares of Ambrose stock 15 months ago for $10,000, and the remaining 500 shares six months ago for $80,000 a. b. for each of the items Capital stock c. Paid-in capital and profits d. Total If Marcia receives her 50 percent share ofl assets and liabilities, determine her gain d her basis in each asset received as a resuk of the liquidation. Assume that Chevas marginal tax rate is 30 percent but thur ao tax was paid by Chevez. 33. Ted purchased all of the stock of Fontana Manufacturing Corporation in 2015 for $170,000. Under Ted's leadership, Fontana Manufacturing soon became unprofitable, 35. Martin Corporation adops a plan cd and Ted decided to liquidate Fontana as of the close of business on June 30, 2017. All of Fontana's assets were needed to pay third party creditors, and Ted received nothing for his $170,000 investment. a. Describe the amount and character of complete liquidation. Two months later Martin sells its main asset, a motel, in it has a basis of $300,000, for $800,000 an unrelated partnership. Martin receiviod a $200,000 down payment and a mortg note payable ,00 month for 5 years plus 6 percent interes the remaining balance. Martin uses its existing cash to pay the tax and distributes the $200,000 cash from and the note to its only who has a basis of $30,000 or her sto If there is no recapture, what are in installments of $10, Ted's loss. How would your answer to (a) change if Fontana Manufacturing were instead owned by TED Corporation? b. consequences to Martin Corporaio Laura? Doug and Sally (unrelated ; 60 percent and 40 percent 44, 42. Palm Corporation i s owned 60 percent by Jay and 40 percent by Scott. Jay and Scott are unrelated individuals. Palm's two principal assets are cash of $140,000 and a building that Palm purchased 10 years ago and that now has an adjusted basis of $80,000 and a fair market value of $60,000. What amount of loss is recognized by Palm Corporation if it makes the following alternative distributions in complete liquidation? a. Palm distributes the building plus outstanding stock of Platt Corpothiciy assets consist of land (Sec. 123 ma that was purchased in 2013 for $90. has current fair market value of soad and other property that has a basis of and other property that has a basi and a fair market value of $40. to a plan of complete liquidation, Pa Corporation distributes the land to the other property to sally on July 23, ajn a. How much gain and loss does 560.000 in cash to Jay and $80,000 in cash to Scott. Palm distributes $120,000 in cash to Jay and the building plus $20,000 in cash to Scott. Platt Corporation recognize on th liquidating distributions? Can any suggestions that willi b. mprove te tax consequences of the liquidating c. Palm distributes 60 percent of the cash distributions? and a 60 percent interest in the building to Jay and 40 percent of the cash and a 40 percent interest in the building to b. How would your answers to part a change if the land had instead beren contributed as a capital contribution b Doug in 2013 when the land had a of $90,000 and a fair value of $9500 d. Same as (c), except that the building had been contributed to Palm Corporation by Scott as a contribution to capital during 2016, when the building's basis was $90,000 and its fair market value was $65,000 Same as (c), except that the building had been contributed to Palm Corporation by Jay as a contribution to capital four years ago (during 2013), when the building's basis was $120,000 and its fair market value was $110,000. 45. Elm Corporation has 100 shares of outstanding of which Oak Corporation owns 75 shares with a basis of $10,00, and Sherman Forest owns 25 shares wih a basis of $30,000. Elm Corporation has e. $50,000 net operating loss carryover nd b following assets (all held long-term): Basis Fair Cash 20,000 20 43. Panashe Corporation purchased 20 percent of Servco Corporation's stock on each of the following dates: January 4, 2016; April3, 2016; July 14, 2016; December 15, 2016; and January 5, 2017. Can Panashe make a Sec. 338 clection to have the Servco stock purchases treated as an acquisition of assets? 1000 5.000 Equipment (all Sec 536000 80 a. What are the tax consequences By what date must the election be made? a. Corporation adopts a plan of cama liquidation and distributes the sxte cash to Sherman and all ts remaiig assets to Oak Corporation As an alternative, what are the How would your answers change if the purchase dates were instead January 4, 2015; April 3, 2016; July 14, 2016; December 15, 2016; and January 5, 2017? How would your answers change if the consequences if Elm Corporation distributes $20,000 cash to Sh b. purchase dates were instead January 4, 2016; April 3, 2016; July 14, 2016; January 4, 2017; and April 15, 2017? in redemption of his 25 share days later, Elm adopes a plan of liquidation and distributes its rm assets to Oak Corporation? Whar and Oak trying t Sherman the redemption of 16-21 PROBLEMS Baretta Corp. owns 100 percent of the stock 30. A cash-method corporation adopts a plan of PPK Corp, and also owns PPK Corp debentures with a face amount (and basis) of following assets to its sharcholders: 27 $200,000. A plan of liquidation is adopted nd PPK is liquidated under Code Sec. 332 of complete liquidation and distributes the A truck that was purchased for $25,000, s worth $18,000, and has a basis of Pursuant to the liquidation, PPK distributes inventory with a FMV of $200,000 and a basis of $220,000 in cancellation of the debentures. 11,000. An installment note receivable with a remaining face amount of $20,000, resulting from a sale of a warehouse for How much loss can be recognized by PPK Corp. on the distribution of the $75,000 seven years ago in which the warehouse's basis at the time of sale was inventory to Baretta? $25,000. b. What is Baretta Corp's tax basis for the Accounts receivable of $7,000. inventory received from PPK? 28. Ellen received a liquidating distribution from $13,000. In exchange for her stock, Ellen expensed, worth $350. What gains are recognized by the liquidating Lopas Corp as part of a redemption of all of its stock. Ellen's basis for her Lopas stock was corporation on the distributions in complete liquidation? received property with a S10,000 basis and a $35,000 fair market value that is subject to a $18,000 mortgage, and also received cash of 31. The stock of Richmond Corp. is owned 60 percent by Sid and 40 percent by Mark who are unrelated individuals. During 2016, Sid transferred land (basis of $300,000: FMV of $260.000) as a contribution to the capital of Richmond Corp. During March 2017. Richmond Corp. adopted a plan of liquidation and subsequently made a non pro rata distribution of the land to Mark. At the time of the liquidating distribution, the land had a FMV of $230,000. a. What amount of loss can be recognized $15,000. a. What is Ellen's realized and recognized gain from this complete liquidation? b. What is Ellen's tax basis for the non-cash property he received? 29. Brenda owns 100 percent of Walker Corp. She has a basis for her stock of $20,000. The corporation's only assets are cash of $20,000 and land with a basis of $75,000 and a value of $95,000. Earnings and profits are $125,000. Walker Corp liquidates and distributes its assets to Brenda, whose stock is cancelled. a. What is the gain recognized by Walker by Richmond Corp. on the distribution of land to Mark? What is Mark's tax basis for the land that he received b. Corp.? profits? What is Brenda's basis for the land? What happens to Walker's carnings and gain is recognized by Brenda b. d. 34. Marcia is a 50 percent shareholder Chevez Corp., which is in the progo liquidation. Marcia's basis for b $25,000. Chevez's balance sheeck 32. Alex purchased one thousand shares of Ambrose Corporation stock on March 10, 2016, for $95,000. On August 1, 2017, Alex received the following as a distribution in cancellation of his stock in a complete liquidation of Ambrose: of iqdation is as follows Cash 100 shares of Public Co.20,000 Accounts receivable Basis 32,000 320 Fair Market Value $5,000 200,000 10.0 50,000 30,000 Land Building Building (depreciated straight line) Totals $548,000 $1008 $145,000 Equities Mortgage on real estate Unsecured liabilities What is the amount and character of Alex's recognized gain? What is Alex's basis of property received? When does the holding period for each of the items of property begin? How would your answer to (a) change if Alex had purchased 500 shares of Ambrose stock 15 months ago for $10,000, and the remaining 500 shares six months ago for $80,000 a. b. for each of the items Capital stock c. Paid-in capital and profits d. Total If Marcia receives her 50 percent share ofl assets and liabilities, determine her gain d her basis in each asset received as a resuk of the liquidation. Assume that Chevas marginal tax rate is 30 percent but thur ao tax was paid by Chevez. 33. Ted purchased all of the stock of Fontana Manufacturing Corporation in 2015 for $170,000. Under Ted's leadership, Fontana Manufacturing soon became unprofitable, 35. Martin Corporation adops a plan cd and Ted decided to liquidate Fontana as of the close of business on June 30, 2017. All of Fontana's assets were needed to pay third party creditors, and Ted received nothing for his $170,000 investment. a. Describe the amount and character of complete liquidation. Two months later Martin sells its main asset, a motel, in it has a basis of $300,000, for $800,000 an unrelated partnership. Martin receiviod a $200,000 down payment and a mortg note payable ,00 month for 5 years plus 6 percent interes the remaining balance. Martin uses its existing cash to pay the tax and distributes the $200,000 cash from and the note to its only who has a basis of $30,000 or her sto If there is no recapture, what are in installments of $10, Ted's loss. How would your answer to (a) change if Fontana Manufacturing were instead owned by TED Corporation? b. consequences to Martin Corporaio Laura? Doug and Sally (unrelated ; 60 percent and 40 percent 44, 42. Palm Corporation i s owned 60 percent by Jay and 40 percent by Scott. Jay and Scott are unrelated individuals. Palm's two principal assets are cash of $140,000 and a building that Palm purchased 10 years ago and that now has an adjusted basis of $80,000 and a fair market value of $60,000. What amount of loss is recognized by Palm Corporation if it makes the following alternative distributions in complete liquidation? a. Palm distributes the building plus outstanding stock of Platt Corpothiciy assets consist of land (Sec. 123 ma that was purchased in 2013 for $90. has current fair market value of soad and other property that has a basis of and other property that has a basi and a fair market value of $40. to a plan of complete liquidation, Pa Corporation distributes the land to the other property to sally on July 23, ajn a. How much gain and loss does 560.000 in cash to Jay and $80,000 in cash to Scott. Palm distributes $120,000 in cash to Jay and the building plus $20,000 in cash to Scott. Platt Corporation recognize on th liquidating distributions? Can any suggestions that willi b. mprove te tax consequences of the liquidating c. Palm distributes 60 percent of the cash distributions? and a 60 percent interest in the building to Jay and 40 percent of the cash and a 40 percent interest in the building to b. How would your answers to part a change if the land had instead beren contributed as a capital contribution b Doug in 2013 when the land had a of $90,000 and a fair value of $9500 d. Same as (c), except that the building had been contributed to Palm Corporation by Scott as a contribution to capital during 2016, when the building's basis was $90,000 and its fair market value was $65,000 Same as (c), except that the building had been contributed to Palm Corporation by Jay as a contribution to capital four years ago (during 2013), when the building's basis was $120,000 and its fair market value was $110,000. 45. Elm Corporation has 100 shares of outstanding of which Oak Corporation owns 75 shares with a basis of $10,00, and Sherman Forest owns 25 shares wih a basis of $30,000. Elm Corporation has e. $50,000 net operating loss carryover nd b following assets (all held long-term): Basis Fair Cash 20,000 20 43. Panashe Corporation purchased 20 percent of Servco Corporation's stock on each of the following dates: January 4, 2016; April3, 2016; July 14, 2016; December 15, 2016; and January 5, 2017. Can Panashe make a Sec. 338 clection to have the Servco stock purchases treated as an acquisition of assets? 1000 5.000 Equipment (all Sec 536000 80 a. What are the tax consequences By what date must the election be made? a. Corporation adopts a plan of cama liquidation and distributes the sxte cash to Sherman and all ts remaiig assets to Oak Corporation As an alternative, what are the How would your answers change if the purchase dates were instead January 4, 2015; April 3, 2016; July 14, 2016; December 15, 2016; and January 5, 2017? How would your answers change if the consequences if Elm Corporation distributes $20,000 cash to Sh b. purchase dates were instead January 4, 2016; April 3, 2016; July 14, 2016; January 4, 2017; and April 15, 2017? in redemption of his 25 share days later, Elm adopes a plan of liquidation and distributes its rm assets to Oak Corporation? Whar and Oak trying t Sherman the redemption of