Purple Corporation is acquiring Gray Corporation in a transaction that qualities as a 5368 reorganization by...

 

 

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Purple Corporation is acquiring Gray Corporation in a transaction that qualities as a 5368 reorganization by exchanging $650,000 of stock and three parcels [(Parcel 1 FMV $350,000 – Basis $50,000); (Parcel 2 FMV $250,000 – Basis $100,000); (Parcel 3 FMV $400,000 – Basis $275,000] for all of Gray's assets (Stock-$450,000 and land (FMV of $500,000 and basis of $350,000) and liabilities of $175,000. Gray also has 200,000 of Earnings & Profits. Gray sells both parcels for its FMV and uses proceeds to compensate employees who are losing their jobs. Gray then liquidates transferring parcel 3 and the stock received to its shareholders. Use the format below to determine the tax consequences of the reorganization to all parties (the acquiring corporation, the target corporation, and the shareholders of Gray Corporation)? SHOW CALCULATIONS Acquiring Corp Target Corp Shareholders Stock Land 1 Basis Land 2 Basis Stock Land 1 Basis Land 2 Basis New Old Realize Gain Realize Gain Shareholders Realized Gain Recognize Gain Recognize Gain Shareholders Recognize Gain Basis Basis Basis Character of Gain to Target Character of Gain to Shareholder Purple Corporation is acquiring Gray Corporation in a transaction that qualities as a 5368 reorganization by exchanging $650,000 of stock and three parcels [(Parcel 1 FMV $350,000 – Basis $50,000); (Parcel 2 FMV $250,000 – Basis $100,000); (Parcel 3 FMV $400,000 – Basis $275,000] for all of Gray's assets (Stock-$450,000 and land (FMV of $500,000 and basis of $350,000) and liabilities of $175,000. Gray also has 200,000 of Earnings & Profits. Gray sells both parcels for its FMV and uses proceeds to compensate employees who are losing their jobs. Gray then liquidates transferring parcel 3 and the stock received to its shareholders. Use the format below to determine the tax consequences of the reorganization to all parties (the acquiring corporation, the target corporation, and the shareholders of Gray Corporation)? SHOW CALCULATIONS Acquiring Corp Target Corp Shareholders Stock Land 1 Basis Land 2 Basis Stock Land 1 Basis Land 2 Basis New Old Realize Gain Realize Gain Shareholders Realized Gain Recognize Gain Recognize Gain Shareholders Recognize Gain Basis Basis Basis Character of Gain to Target Character of Gain to Shareholder

Answer rating: 100% (QA)

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