Parent Corporation purchased 75% of Subsidiary Corporation seven years ago, Subsidiary's current balance sheet shows the following figures

1) Parent Corporation purchased 75% of Subsidiary Corporation seven years ago, Subsidiary's current balance sheet shows the following figures

Basis

Value

Demand Deposit

$20,000

$20,000

IBM Stock

30,000

50,000

Parking lot

5000

30,000

Building

0

1,00,000

Mortgage

-15,000

-15,000

Subsidiary has a net operating loss carryover of $7000 and earnings and profits of $22,000

Subsidiary redeems Roy Ramble's 25% stock interest in exchange for the IBM stock. Subsidiary then adopts a plan of complete liqudiation and distributes its assets to Parent in complete liqudiation.

a) What is the tax result to Roy?

b) Does subsidiary recognize any gainon the redemption of the liqudiation?

c) What are Parent's bases for the assets received?

d) What happens to Subsidiary's NOL and EP?

2)

Mini-Skirts ltd owned by one shareholde, owns one asset a building worth $100,000 with a zero basis. The shareholder's stock basis is $20,000.  A plan of compelte liqudiation is adopted. What are the tax consequences to both parties in each of the following independent cases?

a. The building is deeded to the shareholder, Bill Jones, who is taxed under Code Sec 331.

b. The building is sold for an installment note that is ditributed to Bill.

c. Mini-Skirts Ldt sells the building and presents a cashier's check for $100,000 to Bill.

d. The building is deeded to the shareholder, Bill Inc, in a Code Sec 332 liquidation.

3)

Label the following transactions:

a. A Nevada corporation formed a corporation in Florida and transferred all assets to it for 100 % of its stock. It then distributed the stock to its shareholders in cancellation of their Nevada corporation stock and was dissolved.

b. ABC Corp. acuired all the stock of MNO Corp. for its convertible bonds. ALL MNO assets were transferred to ABC, whereupon MNO was dissolved.

c. A corporation issues $30,000 worth of its own voting stock to retire some of its outstanding bonds with a principal amount of $40,000.

d. Convertible preffered stock is converted into common stock of the issuing corporation.

e. A corporation incorporates a division and distributes the shares received pro-rata to its shareholders.

f. A corporation distributes preferred stock for each 10 shares of common stock outstanding.

6)

An S corporation has the following information:

Sales

1,00,000

Dividend income

1,500

Tax-exempt interest

2500

Long-term capital gain

4,000

Short-term capital gain

1,800

Cost of goods sold

50,000

Advertising expense

3,000

Charitable contributions

1,000

Interest expense

2,000

Salary expense

25,000

Other operating expenses

8,000

Computer the S corporation taxable income for the year. AFTER PAYMENT ENTER PASSWORD : "shiv" TO UNLOCK THE SOLUTION