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ACCT 540 Corporate Liquidation Problem PART A: Newco is owned 100% by Jeff Williams. Jeffs tax basis in his Newco shares is $1,300,000. Newco has
ACCT 540
Corporate Liquidation Problem
PART A: Newco is owned 100% by Jeff Williams. Jeffs tax basis in his Newco shares is $1,300,000.
Newco has the following assets and liabilities when it proposes to liquidate.
AssetFMVTax BasisCash180,000180,000Equipment190,000-0-Inventory170,000110,000Land255,000165,000Building900,000540,000Goodwill1,200,000-0-Totals2,895,000995,000REQUIRED:
- What is the tax effect of a liquidation to Newco?
- What is the tax effect of a liquidation to Jeff?
PART B: Same as Part A except Newco is owned by Jeffco, also a C corporation.
REQUIRED:
- What is the tax effect of a liquidation to Newco?
- What is the tax effect of a liquidation to Jeffco?
VARIATION: Same facts as in Part A and Part B except Newco has a net operating loss (NOL) of $2,200,000. Answer the same questions (both with Jeff as the owner and with Jeffco as the owner).
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