Problem $19-59($L$0.8,9)$

For the last $11$ years, Lime Corporation has owned and operated four different trades or businesses. Lime

also owns stock in several corporations that it purchased for investment purposes. The stock in Lime

Corporation is held equally by Sultan, an individual, and by Turquoise Corporation. Both Sultan and

Turquoise own $1,000$ shares in Lime that were purchased nine years ago at a cost of $$200$ per share.

Determine whether the following independent transactions qualify as partial liquidations under $302($b$)(4).$

In each transaction, determine the tax consequences to Lime Corporation, to Turquoise Corporation, and to

Sultan.

a$.$ Lime Corporation sells one of its trades or businesses $($basis of $$500,000,$ fair market value of

$$700,000)$ and distributes the proceeds equally to Sultan and Turquoise Corporation in redemption of $250$

shares from each shareholder. Lime Corporation has E & P of $$2,100,000$ as of the date of the distribution.

The redemption will qualify as a partial liquidation as to

recognized gain $vv$ of $$,x$ and Turquoise has dividend income $$ of $

$x.$

Lime Corporation will have a recognized $,$ of $$,x$ on the sale of the trade or

business.

b$.$ Lime Corporation distributes the stock investments $($basis of $$425,000,$ fair market value of $$700,000)$

it holds in other corporations to Sultan and Turquoise Corporation equally in redemption of $250$ shares

from each shareholder. Lime Corporation has E & P of $$2,100,000$ as of the date of the distribution.

The redemption will qualify as a partial liquidation as to neither Sultan nor Turquoise $.$ As a

result Sultan has dividend income not$$ of $$

$x$ and Turquoise has

dividend income $$ of $

$x.$

Lime Corporation will have a recognized gain $$ of $

$x$ on the distribution of the

stock.