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Corporate Liquidation Problem PART A: Newco is owned 100% by Jeff Williams. Jeffs tax...

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Accounting

Corporate Liquidation Problem

PART A: Newco is owned 100% by Jeff Williams. Jeffs tax basis in his Newco shares is $1,300,000.

Newco has the following assets and liabilities when it proposes to liquidate.

Asset FMV Tax Basis
Cash 180,000 180,000
Equipment 190,000 -0-
Inventory 170,000 110,000
Land 255,000 165,000
Building 900,000 540,000
Goodwill 1,200,000 -0-
Totals 2,895,000 995,000

REQUIRED:

What is the tax effect of a liquidation to Newco?

What is the tax effect of a liquidation to Jeff?

PART B: Same as Part A except Newco is owned by Jeffco, also a C corporation.

REQUIRED:

What is the tax effect of a liquidation to Newco?

What is the tax effect of a liquidation to Jeffco?

VARIATION: Same facts as in Part A and Part B except Newco has a net operating loss (NOL) of $2,200,000. Answer the same questions (both with Jeff as the owner and with Jeffco as the owner).

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