Question 5: (30 points; 15 points for each subpart) Facts: K-Pop groups Blackpink and BTS (through their wholly-owned Delaware shell corporations PINKCO, INC. ("PINKCO") and BTSCO, INC. ("BTSCO"), respectively), together own all of the stock of Idol, Inc. ("IDOL"), a Delaware corporation that is engaged in the business of ensuring that K-Pop supplants all other types of music in the United States. IDOL has the following assets: Cash Asset: Value: Basis: $ 15,000 $ 9,000 Equipment $ 20,000 $ 50,000 Secret K-Pop IP $ 50,000 $ 0 Tour bus $ 10,000 $ 40,000 Fan merchandise $ 5,000 Total $ 100,000 $ 1,000 $ 100,000 The secret K-Pop IP is know-how about how to make incredibly catchy music and win the hearts of millions of fans worldwide. IDOL received all of these assets as contributions to capital and has held them for over five years each. IDOL has no liabilities and hence its aggregate stock value is $100,000. IDOL has $500,000 of accumulated earnings and profits. IDOL's capital structure is as follows: Shareholder PINKCO BTSCO Shares Instrument 85 Voting Common Stock 15 Voting Common Stock PINKCO's basis in its IDOL voting common stock is $300,000 (Value, $85,000). BTSCO's basis in its IDOL voting common stock is $6,000 (Value, $15,000). Each of PINKCO and BTSCO has held its IDOL stock for more than one year. Page 11 of 13 Although Blackpink and BTS initially worked well together in using IDOL to conquer the U.S. music industry, Jennie of Blackpink and Jung Kook of BTS fell in love in 2021 and ran off together, causing the two groups to argue and their working relationship to rapidly deteriorate. On August 31, 2022, the remaining members of Blackpink and BTS held a meeting in their capacity as representatives of PINKCO and BTSCO and orally decided that they could no longer be co- shareholders of IDOL. At that meeting, the attendees verbally agreed to dissolve their venture and go their separate ways. On October 1, 2022, IDOL formally adopted a plan of complete liquidation at a special meeting of its board of directors.