Clean Corporation runs a chain of dry cleaners. Borax is used heavily in Clean's dry cleaning process
Question:
Clean Corporation runs a chain of dry cleaners. Borax is used heavily in Clean's dry cleaning process and has been in short supply several times in the past. Clean Corporation buys a controlling interest in Dig Corporation-a borax mining concern. Clean's sole reason for purchasing the Dig stock is to ensure Clean of a continuous supply of borax if another shortage develops. Although borax must be refined before it is usable for dry cleaning purposes, a well-established commodities market exists for trading unrefined borax for refined borax. After owning the Dig stock for several years, Clean sells the stock at a loss because Dig is in financi straits. Clean no longer needs to own Dig because Clean has obtained an alternative source of borax.
What is the nature of Clean's loss on the disposition of the Dig Corporation stock?
Write a letter to the controller, Salvio Guitterez, that contains your advice and prepare a memo for the tax files. The mailing address of Clean Corporation is 4455 Whitman Way, San Mateo, CA 94404.
CorporationA 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:
South Western Federal Taxation 2015
ISBN: 9781305310810
38th Edition
Authors: William H. Hoffman, William A. Raabe, David M. Maloney, James C. Young