Question
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.
Answer True or False to the following:
Merchant Corporation owned 100% of Craft Corporation since 2000. Merchant Corporation’s basis in their Craft stock was $200,000. Merchant Corporation had an NOL of $60,000 and an 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.
Potential recapture would pass to Merchant Corporation.
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Applied Corporate Finance
Authors: Aswath Damodaran
4th edition
978-1-118-9185, 9781118918562, 1118808932, 1118918568, 978-1118808931
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