"A" owns 100 shares of Humdrum Corporation which he purchased several years ago for $10,000. What are the tax consequences to A on the liquidation of Humdrum Corporation in the following alternative situations: (a) Humdrum distributes $20,000 to A in exchange for his stock? (b) What result in (a), above, in A receives $10,000 in the current year (year one) and $10,000 in year two? Would there be any problem if Humdrum does not adopt a formal plan of complete liquidation in year one?
"A" owns 100 shares of Humdrum Corporation which he purchased several years ago for $10,000. What are the tax consequences to A on the liquidation of Humdrum Corporation in the following alternative situations: (a) Humdrum distributes $20,000 to A in exchange for his stock? (b) What result in (a), above, in A receives $10,000 in the current year (year one) and $10,000 in year two? Would there be any problem if Humdrum does not adopt a formal plan of complete liquidation in year one?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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"A" owns 100 shares of Humdrum Corporation which he purchased several years ago for $10,000. What are the tax consequences to A on the liquidation of Humdrum Corporation in the following alternative situations:
(a) Humdrum distributes $20,000 to A in exchange for his stock?
(b) What result in (a), above, in A receives $10,000 in the current year (year one) and $10,000 in year two? Would there be any problem if Humdrum does not adopt a formal plan of complete liquidation in year one?
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Cost of 100 shares = $10,000
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