Uncle Fudd has decided to sell his ownership in CougarConstruction, Inc., to Cousin Elmer. How would the legal firmhandling this transaction determine a fair price per share?
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Uncle Fudd has decided to sell his ownership in Cougar
Construction, Inc., to Cousin Elmer. How would the legal firm
handling this transaction determine a fair price per share?
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- Miguel is a citizen and resident of Brazil. During the current vear, Miguel never visits the UnitedStates nor does he hold a green card. However, he receives a dividend from Micro Corporation,receives interest on a bond issued by MBI Corporation, realizes a gain on the sale of ExtelCorporation stock, and realizes a gain on the sale of 1,000 acres of undeveloped land located inTexas. Micro, MBI and Extel are all corporations organized in the United States. The United States does not have an income tax treaty with brazilDescribe the U.S. tax consequences of each of the above items of income. Also, indicate how our answers would change if Miquel held a green card.Required: (1) Determine whether Grealish will accept the contract. Show calculations of his utility to two decimal places. Also, indicate whether Grealish will work hard or shirk. (include all steps of calculation) (2) Calculate Jack's utility. Jack is risk-neutral and his utility for money is equal to the cash received. (include all steps of calculation) (3)Jack's business has publicly traded shares. Explain whether you would recommend a compensation contract based on both net income and share price performance under the following conditions; a- Net income is calculated based on historical cost. b- Net income is calculated based on fair value accounting.Keith’s sole proprietorship holds assets that, if sold, would yield a gain of $100,000. It also owns assets that would yield a loss of $30,000. Keith incorporates his business using only the gain assets. Two days later, Keith sells the loss assets to the newly formed corporation. What is Keith trying to accomplish? Will he be successful? Explain.
- Adams transfers Blackacre to Newco in exchange for 100% of its common stock. Adams acquired Blackacre for $50,000 cash plus a purchase money mortgage of $200,000. Adams has claimed $100,000 of depreciation on Blackacre and has paid $80,000 of the purchase money mortgage. Blackacre had a FMV of $400,000 at the time of the transfer. What are the tax consequences to Adams and Newco? Assume Adams had paid only $30,000 of the purchase money mortgage, how would that affect your answer to part (a)? Assume in part (b) that Adams transferred $20,000 of cash to Newco along with Blackacre, how would that affect your answer to part (a)? Assume in part (b) that Adams had transferred his own promissory note maturing in 2 years with a face value of $20,000 to Newco along with Blackacre, how would that affect your answer to part (b)? Assume in part (d) that the note Adams transferred had been received by him at the time he loaned $20,000 to Harry. How would that affect…Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $200,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $200,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $60,000 from the bank. If applicable, this debt will be shared equally between the two owners. A. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation? B. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation? C. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an LLC and taxed as a partnership?Wilcox, chief executive officer and chairman of the board of directors, owned 60 percent of the shares of Sterling Corporation. When the market price of Sterling’s shares was $22 per share, Wilcox sold all of his shares in Sterling to Conrad for $29 per share. The minority shareholders of Sterling brought suit against Wilcox, demanding a pro rata share of the amount Wilcox received in excess of the market price. a. What are the arguments to support the minority shareholders’ claim for a pro rata share of the amount Wilcox received in excess of the market price? b. What are the arguments to reject the minority shareholders’ claim for a pro rata share of the amount Wilcox received in excess of the market price? c. Which side should prevail?
- c. What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger? d. What is Ernesto’s tax basis in the STS stock he receives in the exchange?Lily and Mary owed Jake P500,000.00 for advancing their equity in a corporation they joined as incorporators. Lily and Mary bound themselves solidarily liable for the debt. Later, Lily and Jake became sweethearts so Jake condoned the debt of P500,000.00. May Lily demand from Mary P250,000.00 as her share in the debt? Explain.a) A minority shareholder who has a drag-along right is entitled to: sell her shares to the majority shareholders at a pre-agreed price. buy the shares of the majority shareholders at a pre-agreed price. sell her shares along with and at the same terms and conditions as the majority shareholders. force other shareholders to sell their shares along with her if certain conditions are met. None of the above. b) The purpose of a negative pledge on the borrower's assets in an unsecured bank loan agreement is to ensure that the loan is senior to other loans of the borrower. ensure that the loan is subordinated to other loans of the borrower. prevent the borrower from issuing any bonds in the future. ensure that the borrower cannot subsequently take up other loans with a different lender, securing the subsequent loan with the borrower's assets. ensure that the borrower cannot subsequently lend money to other firms without insisting on collaterals to secure the loan.
- ABC plans to acquire DEF has substantial depreciable assets that have a fair values in excess of their book values. Considering only the tax impact, which of the following statement is true? BothABC and DEF would prefer ABC to purchase DEF’s BothABC and DEF would prefer ABC to purchase DEF’s ABCwould prefer to purchase DEF’s assets and DEF would prefer to sell its shares to ABCwould prefer to purchase DEF’s shares and DEF would prefer to sell its assets to60. Jakub and Sylvia propose to have their corporation, Wolverine Universal (WU), acquire another corporation, EMU Inc., in a tax-deferred triangular merger using an acquisition subsidiary of WU. The sole shareholder of EMU, Edie Eagle, will receive $250,000 plus $150,000 of WU voting stock in the transaction. a) Can the transaction be structured as a forward triangular merger? Explain why or why not. b) Can the transaction be structured as a reverse triangular merger? Explain why or why not.Townsend, the sole shareholder of Pruett Corporation, has a $545,600 basis in his stock. He exchanges all of his Pruett stock for $682,000 of Rogers voting common stock plus land with a fair market value of $136,400 and basis of $34,100. Pruett distributed the land to Townsend. This exchange meets all Code requirements. If an amount is zero or there is no gain or loss, enter "0". a. What is Townsend's recognized gain/loss from the reorganization? Townsend recognizes a gain of $_____________ b. What is the gain/loss recognized by Pruett Corporation and Rogers Corporation on the reorganization?Rogers Corporation recognizes a gain of $___________ and Pruett Corporation recognizes no gain or loss of $0 c. What is Townsend's basis in the Rogers stock and the land received?The basis in the Rogers stock is $___________ and the basis in the land is __________
