After reading the Bartz Corporation article, you are left with two alternatives (alternative A and alternative B), for tax purposes what would be the better alternative for liquidating the S Corp.? Please explain your answer. When determining the gain when the stock is liquidated, what would be the "liquidation proceeds" under each alternative? What would be the shareholders "stock basis" under each alternative?

1 1 of 2 r tz formed Bartz Corporation in 1989 and elected S status immediately. The entity was wn and manage four-unit apartment buildings in their Mississippi town of Quintet. Over entity was slightly profitable. About a decade ago, the Bartzes began to sell off their buildings, and only one now remains in the corporation's name. Four years ago, the entity sold off the realty management operations to a local entity, the Quintet Life LLC. The Bartzes have no children or any other direct descendants. They are not related to any of the owners of Quintet Life. The couple wants to wind down the activities of Bartz Corp, cashing out of the remaining apartment unit, the Delta Digs, and retiring to a lakefront condo in Arkansas. The couple anticipates that their average state and federal income tax rate will fall from 33 to 26 percent for next year. The Bartzes are not subject to the alternative minimum tax, and Bartz Corp carries no exposure to the corporation built-in-gain or passive investment income taxes. The Bartzes own all of the stock in their S corporation, in equal shares. A long-time employee, Jill Thompson, is the only other member of the board of directors. The board has discussed the status of the corporation after Delta Digs is sold off to a third party; Jill is a registered nurse and has no interest or capacity to stay involved in the real estate business if and when the Bartzes leave town. The Bartz Corp board is indifferent as to whether the corporation should be liquidated after the last property is disposed of, or whether the entity should live on "just in case" another opportunity arises in Quintet and a corporate entity needs to be available and active on a short-term basis. The annual legal and compliance costs are negligible if the board decides to continue Bartz Corp as a shell corporation in this manner. Ignore any other transaction costs that would arise in the context of a corporate liquidation of the entity, or of continuing its existence. Current figures as to Delta Digs is as follows. Bartz Corp owns no other assets and has no outstanding liabilities other than those indicated for the building. The entity uses a June 30 year-end for tax and accounting purposes. Bill and Jan both have a $650 basis in their Bartz Corp shares. Bartz Corporation Balance Sheet as of June 30 (SK) Tax Basis Fair Market Value Delta Digs Apartments Mortgage Payable, Delta Digs 4,500 2,000 6,000 2,000 Paid-In Capital Retained Earnings, AAA 100 2,400 The Bartz board has narrowed its plans for the disposition of Delta Digs to the following two either case, the asset is sold under a contract in Year One, to a single purchaser at fair market value. The purchaser remits $2,000 cash in Year One. It also gives Bartz Corp a note for $4,000, payable in full in Year Two. Largely, the differences between the alternatives is the timing of the events to take place, and of the resulting income tax results. The board has asked you, its financial and tax advisor, to analyze the alternatives from an income tax perspective. Conduct the appropriate tax research and analyze the after-tax results of the two alternatives. Add an additional alternative if you believe that it will improve the parties' results. Both Bill and Jan are comfortable in using spreadsheet software, so submit to them a summary spreadsheet for them to review. ALTERNATIVE A Year One, sellaiset, take installment note Year One, adopt plan to Iquidate Scorp by year end, liquidating distribution s Corp result of note Year Two shareholders collect cash s Corp result from note Shareholder result Corp result Shareholder result Shareholder result ALTERNATIVE B Year One, adopt plan to liquidate Scorp by year end s Corp result Year One, sellasset, take installment note, liquidating distribution of note Year Two, shareholders collect cash S Corp result From note Shareholder result Corp result Shareholder result Shareholder rewit