Compute Clifton stock basis in Gillion on the last day

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Problem - Clifton Corporation acquired all of the outstanding Gillion stock on January 1, year 1, for $2,400,000. The parties immediately elected to file consolidated Federal income tax returns. Gillion reported a year 1 taxable loss of $250,000, but it generated $400,000 of taxable income in year 2 and $180,000 in year 3. Gillion paid a $100,000 dividend to Clifton in year 2 and $300,000 in year 3. Compute Clifton's stock basis in Gillion on the last day of each of the following tax years.

a. Year 1.

b. Year 2.

c. Year 3.

Reference no: EM132647902

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