Nocattee Corporation was initially formed with cash contributions from five unrelated shareholders, each of whom contributed $10,000
Question:
Nocattee Corporation was initially formed with cash contributions from five unrelated shareholders, each of whom contributed $10,000 in exchange for 20% of Nocattee’s voting common stock. . The shareholders have made no further contributions. Assume that none of the shareholders are dealers in stock so that their stock investment is a capital asset . After several years of operations, the corporation adopts a plan of complete liquidation and distributes assets with a basis to the corporation with a basis to the corporation of $50,000 and a fair market value of $30,000. Thus, each shareholder receives $25,000 of the corporate assets upon liquidation At the time of liquidation, the corporation had $125, 000 of its current earnings and profits account and no accumulated earnings and profits.
What if the corporation sold the assets to a third party for $30,000 and distributed the cash to the shareholders upon liquidation?
What are the tax consequences to the corporation and its shareholders?
Principles Of Taxation For Business And Investment Planning 2016 Edition
ISBN: 9781259549250
19th Edition
Authors: Sally Jones, Shelley Rhoades Catanach