Lime corporation distributes the stock basis of 425000 fair

Assignment Help Accounting Basics

Reference no: EM13588250

For the last eleven years, Lime Corporation has owned and operated four different trades or businesses. Lime also owns stock in several corporations that it purchased for investment purposes. The stock in Lime Corporation is held equally by Sultan, an individual, and by Turquoise Corporation. Both Sultan and Turquoise own 1,000 shares in Lime that were purchased nine years ago at a cost of $200 per share. Determine whether the following independent transactions qualify as partial liquidations under § 302(b)(4). In each transaction, determine the tax consequences to Lime Corporation, to Turquoise Corporation, and to Sultan.

a. Lime Corporation sells one of its trades or businesses (basis of $500,000, fair market value of $700,000) and distributes the proceeds equally to Sultan and Turquoise Corporation in redemption of 250 shares from each shareholder. Lime Corporation has E & P of $2,100,000 as of the date of the distribution.

The redemption will qualify as a partial liquidation as to Select Sultan Turquoise both Sultan and Turquoiseneither Sultan and Turquoise Correct 1 of Item 1. As a result Sultan has Select recognized gainrecognized lossdividend incomeCorrect 2 of Item 1of $ and Turquoise has Select recognized gain recognized loss dividend income Correct 4 of Item 1 of $.

Lime Corporation will have a recognized Select gain loss Correct 6 of Item 1 of $ on the sale of the trade or business.

b. Lime Corporation distributes the stock (basis of $425,000, fair market value of $700,000) it holds in other corporations to Sultan and Turquoise Corporation equally in redemption of 250 shares from each shareholder. Lime Corporation has E & P of $2,100,000 as of the date of the distribution.

The redemption will qualify as a partial liquidation as to SelectSultanTurquoiseboth Sultan and Turquoiseneither Sultan and TurquoiseCorrect 1 of Item 2. As a result Sultan has Selectrecognized gainrecognized lossdividend incomeCorrect 2 of Item 2of $ and Turquoise has Select recognized gain recognized loss dividend income Correct 4 of Item 2 of $.

Lime Corporation will have a recognized SelectgainlossCorrect 6 of Item 2 of $ on the distribution of the stock.

Reference no: EM13588250

Questions Cloud

On january 1 a company borrowed 50000 cash by signing a 7 : on january 1 a company borrowed 50000 cash by signing a 7 installment note that is to be repaid in 5 annual end-of-year

Cisco inc reported the following in its income statement : cisco inc. reported the following in its income statement for the year ended july 26 2008 basic earnings per share of

Flitter corporation uses the weighted-average method in its : flitter corporation uses the weighted-average method in its process costing. the following data pertain to its

On january 1 a company issued 10 10-year bonds payable with : on january 1 a company issued 10 10-year bonds payable with a par value of 720000. the bonds pay interest on july 1 and

Lime corporation distributes the stock basis of 425000 fair : for the last eleven years lime corporation has owned and operated four different trades or businesses. lime also owns

Nick and jolene are married nick is 64 and retired last : nick and jolene are married. nick is 64 and retired last year from his job with amalgamated company.jolene is 56 and

On january 2 2013 the cerritos band acquires sound : on january 2 2013 the cerritos band acquires sound equipment for concert performances at a cost of 65800. the band

Heritage insurance co is a regional insurance company that : heritage insurance co. is a regional insurance company that began operations on january 1 2012. the following

Grant film productions wants to expand and has borrowed : grant film productions wants to expand and has borrowed 100000. as a condition for making this loan the bank requires

User Account

All Pages