Corporate Liquidation Problem PART A: Newco is owned 100% by Jeff Williams. Jeffs tax...
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Accounting
Corporate Liquidation Problem
PART A: Newco is owned 100% by Jeff Williams. Jeffs tax basis in his Newco shares is $1,300,000.
Newco has the following assets and liabilities when it proposes to liquidate.
Asset
FMV
Tax Basis
Cash
180,000
180,000
Equipment
190,000
-0-
Inventory
170,000
110,000
Land
255,000
165,000
Building
900,000
540,000
Goodwill
1,200,000
-0-
Totals
2,895,000
995,000
REQUIRED:
What is the tax effect of a liquidation to Newco?
What is the tax effect of a liquidation to Jeff?
PART B: Same as Part A except Newco is owned by Jeffco, also a C corporation.
REQUIRED:
What is the tax effect of a liquidation to Newco?
What is the tax effect of a liquidation to Jeffco?
VARIATION: Same facts as in Part A and Part B except Newco has a net operating loss (NOL) of $2,200,000. Answer the same questions (both with Jeff as the owner and with Jeffco as the owner).
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