Arnie, Becky, and Clay are equal partners in the ABC General Partnership. The three individuals each have
Question:
Liabilities of $75,000 are currently outstanding. The liabilities are shared equally and are already included in the $120,000 bases of the partnership interests. The structure being considered for making the change is as follows:
€¢ ABC Partnership transfers all its assets and liabilities to the new ABC Corporation in exchange for all the corporation€™s stock.
€¢ ABC Partnership then liquidates by distributing the ABC stock to Arnie, Becky, and Clay.
Required:
The tax manager you work for has asked you to determine the tax and financial accounting consequences. Describe the financial and tax treatments in a short memorandum to the partnership. Be sure to mention any relevant IRC sections, Treasury Regulations, revenue rulings, and accounting standards. Assume a 35% corporate tax rate.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson