Unless explicitly stated otherwise, for the short answers and problems, please cite to the appropriate code section, reg. section, court case, or other authority. Cite to the primary authority (code, regs., revenue rulings, court cases, etc.) rather than secondary authority (dont cite to page X in the textbook or page X in the Corporate Formation handout notes or similar references). When citing to cases you can just say, for example, per the Moline Properties case.

All That Freedom and All That Power (24 points) Two individuals, Madeline and Judy, were investigating the acquisition a business owned by Vertigo Corporation (a C corporation). As part of their discussions with the sole shareholder of the corporation, Scottie (an individual), they examined the companys tax accounting balance sheet. The relevant information is summarized as follows:

	FMV Adjusted Basis	Adjusted Basis
Cash	10000	10000
Receivables	15000	15000
Inventory	20000	5000
Building	100000	50000
Land	225000	75000
Total	370000	155000
Mortgage	112000	112000

Scotties tax basis in the Vertigo stock is $100,000. Assume all corporations involved in this problem have lots of earnings and profits and have no NOL carryovers.

A. What amount of gain or loss does Vertigo recognize if the transaction is structured as a direct asset sale to Madeline and Judy, with Madeline and Judy paying Vertigo $400,000 in cash and assuming Vertigos $112,000 mortgage loan? [Note: Madeline and Judy buy all of Vertigos assets (including the cash).] please cite to the appropriate code section, reg. section, court case, or other authority.

B. Under the facts of Part A, what corporate-level tax must Vertigo pay as a result of the transaction? please cite to the appropriate code section, reg. section, court case, or other authority.

C. Under the facts of Part A, what amount of gain or loss does Scottie recognize if Vertigo makes a liquidating distribution to him immediately after the sale of assets to Madeline and Judy? please cite to the appropriate code section, reg. section, court case, or other authority.

D. What basis does Madeline and Judy take in each of the acquired assets? Show each asset individually. (Dont worry about dividing the basis between the two owners). please cite to the appropriate code section, reg. section, court case, or other authority.

E. Assume instead that Scottie sells 100% of his stock in Vertigo to Madeline and Judy for $400,000. What amount of gain or loss does Vertigo recognize if the transaction is structured as a stock sale? please cite to the appropriate code section, reg. section, court case, or other authority.

F. Under the facts of Part E, what corporate-level tax must Vertigo pay as a result of the transaction? please cite to the appropriate code section, reg. section, court case, or other authority.

G. Under the facts of Part E, what amount of gain or loss does Scottie recognize? please cite to the appropriate code section, reg. section, court case, or other authority.

H. Under the facts of Part E, what is Vertigos basis in each of its assets immediately after the transaction? Show each asset individually. please cite to the appropriate code section, reg. section, court case, or other authority.

I. Madeline and Judy will have their C corporation, Valdez, Inc., acquire 100% of the stock of Vertigo from Scottie for $315,550 in cash. What amount of gain or loss does Vertigo recognize if the parties make a Section 338 election? please cite to the appropriate code section, reg. section, court case, or other authority.

J. Under the facts of Part I, what corporate-level tax must Vertigo pay as a result of the transaction? please cite to the appropriate code section, reg. section, court case, or other authority.

K. Under the facts of Part I, what amount of gain or loss does Scottie recognize? please cite to the appropriate code section, reg. section, court case, or other authority.

L. Under the facts of Part I, what is Vertigos basis in each of its assets immediately after the transaction? Show each asset individually. please cite to the appropriate code section, reg. section, court case, or other authority.

M. Madeline and Judy will have their corporation, Valdez, Inc., acquire the business of Vertigo in a Type A merger. As part of the agreement, Madeline and Judy propose to pay $200,000 in cash plus voting stock in Valdez worth $200,000 which Vertigo distributes to Scottie as part of the A merger. Scottie will become a 5% percent shareholder in Valdez after the transaction. Will the continuity of ownership interest (COI) requirements for a Type A merger be met? Explain. please cite to the appropriate code section, reg. section, court case, or other authority.

N. Under the facts of Part M, what amount of gain or loss does Vertigo recognize? (Assume the transaction qualifies as an A merger). please cite to the appropriate code section, reg. section, court case, or other authority.

O. Under the facts of Part M, what amount of corporate-level tax does Vertigo pay as a result of the transaction? (Assume the transaction qualifies as an A merger.) please cite to the appropriate code section, reg. section, court case, or other authority.

P. Under the facts of Part M, what amount of gain or loss does Scottie recognize if the transaction is structured as a Type A merger? (Assume the transaction qualifies as an A merger.) please cite to the appropriate code section, reg. section, court case, or other authority.

Q. Under the facts of Part M, what is Scotties tax basis in the Valdez stock he receives in the exchange? (Assume the transaction qualifies as an A merger.) please cite to the appropriate code section, reg. section, court case, or other authority.

R. Under the facts of Part M, what are the tax bases of the former Vertigo assets held by Valdez after the merger? Show each asset individually. (Assume the transaction qualifies as an A merger.) please cite to the appropriate code section, reg. section, court case, or other authority.