One of The Tax Museum's chief rivals, Fiscal Fossils, has two shareholders, Sarah and Jerry, each of whom own 50 percent of the outstanding stock. Fiscal Fossils has the following assets and faces a corporate tax rate of 21 percent. FMV Tax Basis Cash $200,000 $200,000 Artifacts $300,000 $0 Buildings $500,000 $300,000 Unfortunately for Fiscal Fossils, it is liquidating. It simply can't compete against the amazing tax artifacts at The Tax Museum. Fiscal Fossils enters into a plan of complete liquidation, whereby it distributes its cash, artifacts and buildings pro rata to Sarah and Jerry, after paying any corporate income tax due upon liquidation. 

How much corporate tax will Fiscal Fossils Inc. pay upon liquidation? Continuing with the above, how much tax will Sarah pay upon the liquidation? Assume that Sarah has a $100,000 basis in her stock, has held the stock over 12 months, and faces a 35% tax rate on ordinary income and 20% tax rate on long-term capital gains.  

Answer rating: 100% (QA)

To calculate the corporate tax that Fiscal Fossils Inc will pay upon liquidation we need to determin... View the full answer