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Question 8 9 pts 8. Hold Co has three subsidiaries subsidiary, Goes Down Easy that owns liquor stores, Chocaholic which makes candy, and Eastface whichmakes
Question 8 9 pts 8. Hold Co has three subsidiaries subsidiary, Goes Down Easy that owns liquor stores, Chocaholic which makes candy, and Eastface whichmakes clothing. The shareholders are Alice, Bernie and Yamoto. Dave Disruptor buys Yamoto's shares in HoldCo for $500,000. He immediately informs the other shareholders that they are not running the company properly, especially the liquor stores. He promises to disrupt operations unless they put him in charge of HoldCo. Alice suggests to Endorphin that they need to get rid of Disruptor and they decide to offer him the shares in Goes Down Easy in exchange for all his shares in HoldCo. After lengthy negotiations an agreement is reached. HoldCo transfers all the shares of Goes Down for Disruptor's shares in HoldCo. A valuation by an outside firm has placed the value of Goes Down at $1.2 million and a similar value is given to the shares of Hold Co surrendered by Disruptor. HoldCo's basis in the shares of Goes Down is $300,000. a) Does Disruptor have gain or loss on this exchange and if yes how much is it? If not, why not? b) What is Disruptor's basis and holding period in the Goes Down shares received as part of the deal? c) Does HoldCo recognize gain or loss on the transfer of the Goes Down shares to Disruptor? HTML Editora B I VA - A - TEE 13 x'x, OSE T TH 12pt co
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