When does a corporate liquidation exist for tax purposes?

What are some reasons the shareholders of a corporation might want to liquidate the corporation?

2. LO.1 Under what circumstances are losses disallowed to a corporation in liquidation?

3. LO.1, 4 When does a corporate liquidation exist for tax purposes?

4. LO.1 For purposes of the related-party loss limitation within the context of a complete liquidation, what is the definition of disqualified property?

5. LO.1 For the built-in loss limitation to apply, the property must have been acquired by the corporation as part of a plan whose principal purpose was to recognize a loss on the property by the liquidating corporation. Explain.

6. LO.1 Explain the tax consequences to a shareholder of a corporation in the process of liquidation under the general rule of § 331. May a shareholder use the installment method to report gain on a complete liquidation? Why or why not?

7. LO.2 Discuss the tax consequences to the parent corporation in a § 332 liquidation of a subsidiary.

8. LO.2 In terms of the rules applying to a § 332 parent-subsidiary liquidation, comment on each of the following:
a. The parent corporation’s ownership interest in the subsidiary.
b. The period of time in which the subsidiary must liquidate.
c. The solvency of the subsidiary.

9. LO.2 A subsidiary corporation is liquidated under § 332. Pursuant to its liquidation, the subsidiary transferred property to a minority shareholder. With respect to this distribution, what are the tax consequences to the subsidiary corporation and to the minority shareholder?

10. LO.2 In the context of a § 332 liquidation, a subsidiary corporation distributes property to its parent corporation in satisfaction of indebtedness. Discuss the tax consequences of this distribution for the subsidiary and parent corporations.

11. LO.2 Under what circumstances could the application of § 338 be beneficial to the parent corporation? Detrimental?

12. LO.2 In general, what are the tax consequences of a § 338 election?

13. LO.2 From the perspective of the parent corporation, contrast the tax consequences of a subsidiary liquidation under the general nonrecognition rules with a subsidiary liquidation that follows a § 338 election.

14. LO.3 Why do the tax laws often dictate the legal form of corporate reorganizations?
Be specific.

15. LO.3 Provide a description of the corporate reorganizations available under § 368(a)(1).

16. LO.3 Explain how the tax treatment of corporate reorganizations and like-kind exchanges is similar.

17. LO.3 An acquiring corporation transfers property and stock to the target corporation in a reorganization and receives the target’s assets in exchange. What are the relevant tax issues?

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