6-57

C:6-57 Tango Corporation has one shareholder, Samantha, and Tango owns assets having a $400,000 EMV and $300,000 adjusted basis. Perth Corporation is interested in purchasing the assets, after which Tango will liquidate and distribute the cash proceeds to Samantha minus any amount retained to pay the corporate tax on the gain from the sale. Perth and Tango (via Samantha) are negotiating the sales price of the assets with the issue being: Who bears the ultimate burden of Tango's tax on the sale? The two alternatives being considered are (1) Samantha bears the entire burden or (2) Perth 2167 pays a premium for the assets and thus bears the entire burden. Determine what purchase price Perth will pay under each alternative. Assume a 21% corporate tax rate