4. What are the tax consequence to the corporation of the following alternative

Question

4. What are the tax consequence to the corporation of the following alternative liquidating distributions? Lynch, Inc. distributes its assets to George and Dick as tenants in common, George taking an undivided 4/5ths in each parcel of real estate (Green Acre) (and $160,000 in cash) and Dick taking an undivided 1/5th in each parcel of land (and $40,000 in cash). Green Acre was acquired four years ago, when ts tar market value and bass were both s sooooo, as a contribu on by George in a § 351 transaction in exchange for enough stock to increase his stock ownership from 40% to 80%. Determine the tax consequences to all parties.

Explanation / Answer

The gain (or loss) in anamount equal to the difference between the fair market value (FMV)of the assets received (whether they are cash, other property, orboth) and the adjusted basis of the stock surrendered. S.no. Tax Consequences under various Circumstances: 1 Particulars Shares Value Per Share Period i Purchased 200 $11,000.00 $55.00 5 Years ii Purchased 100 $1,000.00 $10.00 3 Months Total FMV 300 $12,000.00 iii Received -200 $6,000.00 ($30.00) 5 Years Net 100 iv Received 100 $9,000.00 $30.00 Loss ($3,000.00) 2 Particulars Shares Value Per Share Period i Purchased 100 $500.00 $5.00 5 Years ii Purchased 200 $2,000.00 $10.00 3 Months Total 300 $2,500.00 iii Received $1,800.00 2017 iv Received $900.00 2018 Loss ($200.00)

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