Peggy owns 100% of Delta Corporation's stock. She purchased her stock ten years ago, and her current basis for the stock is $215,000. On June 10, Peggy decided to liquidate Delta. Delta's balance sheet prior to the sale of the assets, payment of the liquidation expenses, and payment of federal income taxes, as well as some additional information is as follows: View the balance sheet. View the additional information. Read the requirements. Requirement a. What are the tax consequences of the liquidation to Peggy and Delta Corporation? Assume a 21% corporate tax rate. Let's begin by determining the tax consequences for Delta. Start by computing Delta's recognized gain or loss on each of the assets distributed to Peggy (and in total) as a result of the liquidation. (Complete all input fields. Enter a 0 in the "Recognized gain (loss)" column, and enter "N/A" in the "Character of gain or loss" column if no gain or loss is recognized by Delta.) Cash Assets Marketable securities Equipment Land Total assets Basis $ 260,000 $ 50,000 170,000 300,000 $ 780,000 $ FMV 260,000 37,000 230,000 610,000 1,137,000 Recognized gain (loss) C... Character of gain or loss
Peggy owns 100% of Delta Corporation's stock. She purchased her stock ten years ago, and her current basis for the stock is $215,000. On June 10, Peggy decided to liquidate Delta. Delta's balance sheet prior to the sale of the assets, payment of the liquidation expenses, and payment of federal income taxes, as well as some additional information is as follows: View the balance sheet. View the additional information. Read the requirements. Requirement a. What are the tax consequences of the liquidation to Peggy and Delta Corporation? Assume a 21% corporate tax rate. Let's begin by determining the tax consequences for Delta. Start by computing Delta's recognized gain or loss on each of the assets distributed to Peggy (and in total) as a result of the liquidation. (Complete all input fields. Enter a 0 in the "Recognized gain (loss)" column, and enter "N/A" in the "Character of gain or loss" column if no gain or loss is recognized by Delta.) Cash Assets Marketable securities Equipment Land Total assets Basis $ 260,000 $ 50,000 170,000 300,000 $ 780,000 $ FMV 260,000 37,000 230,000 610,000 1,137,000 Recognized gain (loss) C... Character of gain or loss
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
Problem 58P
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Question
Transcribed Image Text:Balance Sheet
Cash
Assets
Marketable securities
Equipment
Land
Total assets
Equity
Common stock
Retained earnings (and E&P)
Total equity
Print
$
$
Basis
260,000 $
50,000
170,000
300,000
780,000 $
215,000 $
565,000
780,000 $
Done
FMV
260,000
37,000
230,000
610,000
1,137,000
1,137,000
1,137,000
- X
Additional Information
●
The corporation has claimed depreciation of $170,000 on the equipment.
The corporation received the marketable securities as a capital contribution
from Peggy three years earlier at a time when their adjusted basis was
$50,000 and their FMV was $24,000.
Delta incurred $29,000 in liquidation expenses in its final tax year.
Requirements
a.
b.
Print
Done
What are the tax consequences of the liquidation to Peggy and Delta
Corporation? Assume a 21% corporate tax rate.
How would your answer change if Peggy contributed the marketable
securities six years ago?
I
X
×
Transcribed Image Text:Peggy owns 100% of Delta Corporation's stock. She purchased her stock ten years ago, and her current basis for the stock is $215,000. On June 10, Peggy decided to liquidate Delta. Delta's balance sheet
prior to the sale of the assets, payment of the liquidation expenses, and payment of federal income taxes, as well as some additional information is as follows:
View the balance sheet.
View the additional information.
Read
the requirements.
Requirement a. What are the tax consequences of the liquidation to Peggy and Delta Corporation? Assume a 21% corporate tax rate.
Let's begin by determining the tax consequences for Delta. Start by computing Delta's recognized gain or loss on each of the assets distributed to Peggy (and in total) as a result of the liquidation. (Complete all
input fields. Enter a 0 in the "Recognized gain (loss)" column, and enter "N/A" in the "Character of gain or loss" column if no gain or loss is recognized by Delta.)
Cash
Assets
Marketable securities
Equipment
Land
Total assets
Basis
$ 260,000 $
260,000
50,000
37,000
170,000
230,000
300,000
610,000
$ 780,000 $ 1,137,000
FMV
Recognized
gain (loss)
Character of gain or loss
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