Problem On April 23, 2022, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1,200,000. Amazon Corporation has assets with a fair market value of $1,400,000 (basis of $800,000), no liabilities, and no loss or tax credit carryovers. Auk Corporation files a timely § 338 election. Assume that both the aggregate deemed sale price (ADSP) and adjusted grossed-up basis (AGUB) are $1,306,329. If an amount is zero, enter "0". If required, round your answers to the nearest dollar. a. What are the tax consequences of the § 338 election to Amazon Corporation and to Auk Corporation? ✓of $ Amazon is treated as a new Amazon Corporation is deemed to have sold its assets which results in a realized gain 506,329✔ of which s 506,329 ✔ recognized. corporation with E & P $ Amazon Corporation now has a basis of $ holding period in the assets begin on April 24, 2022 450,000 X. 1,306,329 ✔ in the assets, and its V. Auk Corporation has a recognized gain of $ Amazon Corporation stock is $ 1,200,000 ✓. 0 ✓ and its basis in the
Problem On April 23, 2022, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1,200,000. Amazon Corporation has assets with a fair market value of $1,400,000 (basis of $800,000), no liabilities, and no loss or tax credit carryovers. Auk Corporation files a timely § 338 election. Assume that both the aggregate deemed sale price (ADSP) and adjusted grossed-up basis (AGUB) are $1,306,329. If an amount is zero, enter "0". If required, round your answers to the nearest dollar. a. What are the tax consequences of the § 338 election to Amazon Corporation and to Auk Corporation? ✓of $ Amazon is treated as a new Amazon Corporation is deemed to have sold its assets which results in a realized gain 506,329✔ of which s 506,329 ✔ recognized. corporation with E & P $ Amazon Corporation now has a basis of $ holding period in the assets begin on April 24, 2022 450,000 X. 1,306,329 ✔ in the assets, and its V. Auk Corporation has a recognized gain of $ Amazon Corporation stock is $ 1,200,000 ✓. 0 ✓ and its basis in the
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 35P
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Transcribed Image Text:Problem 20-38 (LO. 2)
On April 23, 2022, Auk Corporation acquires 100% of the outstanding stock of
Amazon Corporation (E & P of $750,000) for $1,200,000. Amazon Corporation has
assets with a fair market value of $1,400,000 (basis of $800,000), no liabilities, and
no loss or tax credit carryovers. Auk Corporation files a timely § 338 election.
Assume that both the aggregate deemed sale price (ADSP) and adjusted grossed-up
basis (AGUB) are $1,306,329.
If an amount is zero, enter "0". If required, round your answers to the
nearest dollar.
a. What are the tax consequences of the § 338 election to Amazon Corporation and
to Auk Corporation?
Amazon Corporation is deemed to have sold its assets which results in a realized
gain
✓of $ 506,329✔ of which s
506,329✔ recognized.
Amazon is treated as a new
Amazon Corporation now has a basis of $
holding period in the assets begin on April 24, 2022
corporation with E & P $
Auk Corporation has a recognized gain of $
Amazon Corporation stock is $
450,000 X.
1,306,329 ✔ in the assets, and its
1,200,000 ✓.
0✔ and its basis in the
Transcribed Image Text:b. Assume that Amazon Corporation is liquidated immediately following the § 338
election. What are the tax consequences of the liquidation to Amazon Corporation
and to Auk Corporation?
Amazon Corporation recognizes no gain or loss
the liquidating distribution of assets to Auk Corporation.
of $
on
✓ of $
on the
Auk Corporation recognizes no gain or loss
receipt of the assets in liquidation of Amazon Corporation. Under § 334(b), Auk's
basis in the assets is $
and the holding period for the assets
begin on April 23, 2022
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