ACCT 730 Week 3 Problem Set Solutions

ACCT 730 Week 3 Problem Set Solutions - ACCT 730 Week 3...

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ACCT 730 – Week 3 Problem Set Solutions Chapter 6: 35. Condor will recognize no gain or loss and will have a carryover basis of $800,000 in Dove’s assets. Condor acquires the $220,000 of E & P and any other tax attributes of Dove (e.g., net operating loss carryover). Condor’s basis in the Dove stock disappears. Dove recognizes no gain or loss on the liquidation. pp. 6-24 to 6-27 49. The redemption qualifies as a sale or exchange and, since the estate’s basis in the stock is $2 million (stepped-up basis), the distribution results in no gain or loss to the estate. Although § 303 applies only to the extent of the death taxes and funeral and administration expenditures ($700,000), the remainder of the distribution qualifies as a complete termination redemption. All of the estate’s stock has been redeemed, and the sole beneficiary of the estate, Stephanie, does not have an interest in the corporation. Orange Corporation reduces its E & P by $2 million ($4 million preredemption E & P × 65% stock redemption) = $2,600,000, but limited to the
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ACCT 730 Week 3 Problem Set Solutions - ACCT 730 Week 3...

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