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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