Reference no: EM132174093

Assumptions:

T has 100 shares of voting common stock outstanding which are owned 50 shares by Assumptions:T has 100 shares of voting common stock outstanding which are owned 50 shares by A (basis $200), 30 shares by B (basis $400), and 20 shares by C (basis $150). T owns the following assets:

	Basis	Value
Nonoperating assets	$200	$300
Operating assets	$700	$900
Totals	$900	$1,200

T owes $200 (in the form of 20-year bonds held by L with an adjusted basis of $190) and has E&P of $200. Assume that each T share is worth $10 and the property exchanged therefore is worth $10. Unless otherwise indicated, (1) each transaction has a proper business purpose, (2) there is continuity of T's "business enterprise," (3) the transaction is pursuant to a "plan of reorganization," and (4) the face amount of debt is its FMV. P is a publicly held corporation whose stock is traded on the NYSE. What are the tax consequences to A, B, C, L, T, and P from the following transactions?

On January 2 of the current year, P acquires all of the T common stock from A, B, and C solely in exchange for voting preferred stock of P. What would the results in each of the following alternative situations?

a. T first declares a dividend of its nonoperating assets and distributes all of those assets to A, B, and C pro rata. (In this situation, A, B, and C are corporations.)

(This problem is about section 311. You need to calculate how much does T recognize under section 311(b)? Why? You need to show your calculation by demonstrating the changes of T's E&P. And why would T make such distribution?)