Alice and Pete each own 50% of the stock of XYZ Corporation. XYZ has cash of$300,000; inventory with a FMV $1,800,000 (AB $1,400,000) and land with a FMV$2,000,000 (AB $2,100,000). XYZ adopts a formal plan of liquidation and immediatelythereafter distributes its assets to Alice and Pete. Alice receives the Inventory and $250,000of cash, while Pete receives the Land and $50,000 of cash. Alice's adjusted basis in her XYZCorporation stock is equal to $2,120,000 and Pete's adjusted basis in his stock is$1,630,000.(a)(b)(c)What are the tax consequences of the liquidation to XYZ Corporation and Alice andPete?How would your answer to (a), above, change if XYZ Corporation also hadliabilities of $400,000?How would your answer to (a), above, change if XYZ Corporation had a contingentand speculative liability equal to $350,000, which was paid equally by Alice andPete two years after the corporation was liquidated?

a) The tax consequences of the liquidation of XYZ Corporation are that it will recognize gain or…

(a) (b) (c) What are the tax consequences of the liquidation to XYZ Corporation and Alice and Pete? How would your answer to (a), above, change if XYZ Corporation also had liabilities of $400,000? How would your answer to (a), above, change if XYZ Corporation had a contingent and speculative liability equal to $350,000, which was paid equally by Alice and Pete two years after the corporation was liquidated?

(a) (b) (c) What are the tax consequences of the liquidation to XYZ Corporation and Alice and Pete? How would your answer to (a), above, change if XYZ Corporation also had liabilities of $400,000? How would your answer to (a), above, change if XYZ Corporation had a contingent and speculative liability equal to $350,000, which was paid equally by Alice and Pete two years after the corporation was liquidated?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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