PART A: Prestege is owned 100% by Jep Williams. Jeps tax basis in his Prestege shares is
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PART A: Prestege is owned 100% by Jep Williams. Jep’s tax basis in his Prestege shares is 5,900,000.
Prestege has the following assets and liabilities when it proposes to liquidate.
Asset | FMV | Tax Basis |
Cash | 200,000 | 200,000 |
Equipment | 3,300,000 | 1,800,000 |
Inventory | 800,000 | 600,000 |
Land | 900,000 | 700,000 |
Building | 4,700,000 | 2,300,000 |
Goodwill | 3,000,000 | -0- |
Totals | 12,900,000 | 5,600,000 |
REQUIRED:
- What is the tax effect of a liquidation to Prestege?
- What is the tax effect of a liquidation to Jep?
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