The Cabot Corporation has had financial problems for several years.The two shareholders have discussed liquidating the corporation, but they are concerned that they will have to pay a large tax bill because of the corporation’s low basis in its assets and their high fair market value due to their uniqueness. Each shareholder owns some other depreciated business properties that they could give to the corporation as a contribution to capital approximately 20 months before they formally develop their plan of liquidation and liquidate the corporation.

AppendixLO1