Sid Kess, a long-time tax client of yours, has decided to acquire the snow blower manufacturing firm owned by Richard Smith, one of his closest friends. Richard has a $200,000 adjusted basis in his Richard Smith Snow Blowers (RSSB) stock. Sid Kess Enterprises (SKE), a C corporation 100%-owned by Sid Kess, will make the acquisition. RSSB operates as a C corporation and reports the following assets and liabilities as of November 1 of the current year.

RSSB has claimed depreciation of $200,000 and $80,000 on the equipment and building, respectively, and has claimed no amortization on the goodwill. Retained earnings approximate RSSB€™s E&P. No NOL, capital loss, or credit carryovers exist at the time of the acquisition. What are the tax consequences of each alternative acquisition transaction to SKE and RSSB? Assume a 34% corporate tax rate.
a. SKE acquires all the single class of RSSB stock for $1.56 million in cash. RSSB is not liquidated.
b. SKE acquires all the noncash assets of RSSB for $1.54 million in cash. RSSB is liquidated.
c. SKE acquires all the RSSB stock for $1.56 million in cash. RSSB is liquidated into SKE shortly after the acquisition.
d. SKE acquires all the RSSB stock for $1.56 million in cash. SKE makes a timely Sec. 338 election. Assume that RSSB€™s corporate tax rate is 34%.
e. SKE exchanges $1.54 million of its common stock for all of RSSB€™s noncash assets ($1,540,000 = $1,740,000 total assets ˆ’ $200,000 cash). SKE has 10,000 shares of stock outstanding with a $3 million FMV before the acquisition. RSSB liquidates as part of the transaction. RSSB uses part of the retained cash to pay off the corporation€™s liabilities. The remaining cash is distributed along with the SKE stock in the liquidation of RSSB.
f. SKE exchanges $1.56 million of its common stock for all of Richard Smith€™s RSSB stock. Assume that RSSB does not liquidate. Each share of SKE stock has a $300 FMV.
g. Assume the same facts as in Part d except SKE transfers $1.56 million of its common stock to SKE-Sub. In the transaction, SKE-Sub is the acquiring corporation and uses $1.56 million of the SKE stock to acquire RSSB€™s stock.
h. Assume the same facts as in Part e except SKE transfers $1.54 million of its common stock to SKE-Sub. In the transaction, SKE-Sub is the acquiring corporation and uses $1.54 million of the SKE stock to acquire RSSB€™s noncash assets.

Assets Adjusted Basis FMV Cash S 200,000 S 200,000 Inventory (LIFO) Equipment Building 470,000 600,000 275,000 295,000 120,000 100,000 200,000 Land 80,000 Goodwill 250,000 Total $1,740,000 Liabilities and Equity Accounts payable Mortgage payable Paid-in capital Retained earnings Amount S 60,000 120,000 220,000 650.000 Total