Illustrate what are the tax consequences to daisy

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Reference no: EM13126241

Daisy Corporation is the sole shareholder of Ostrich Corporation, which it hopes to sell within the next three years. The Ostrich stock (basis of $25 million) is currently worth $30 million, but Daisy believes that it would be easier to find a buyer if it was worth less. To lower the value of its stock, Ostrich distributes $4 million cash to Daisy (sufficient E & P exists to cover the distribution). At a later date, Daisy sells Ostrich for $26
million.

a. What are the tax consequences to Daisy on the sale?

Reference no: EM13126241

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