- Tax Consequences For Maryssa Assuming The Same Facts Except That On January 2 Of The Current Year Delta Liquidates Afte 1 (36.49 KiB) Viewed 45 times
Tax consequences for Maryssa assuming the same facts except that on January 2 of the current year Delta liquidates. After retaining cash to pay the accounts payable and tax liability resulting from the liquidation, all property is distributed to Maryssa. Maryssa recognizes gain under Sec. 331(a) as follows: Cash + FMV of noncash property received 1,795,750 Adjusted basis of stock = 215,000 Maryssa takes the following FMV bases under Sec. 334(a): Property received Basis $ 220,750 100,000 440,000 270,000 765,000 Cash Marketable securities Inventory Equipment Building Gain (loss) recognized 1,580,750 = $
Tax consequences for Delta assuming the same facts except that on January 2 of the current year Delta liquidates. After retaining cash to pay the accounts payable and tax liability resulting from the liquidation, all property is distributed to Maryssa. Delta recognizes gain under Sec. 336(a) as follows: Marketable securities Inventory Equipment Building Total Times: Tax rate Tax liability $ FMV 100,000 440,000 270,000 765,000 FA Adjusted cost basis = 50,000 = $ 330,000 $ 230,000 = $ 540,000 $ $ = Amount 50,000 110,000 40,000 225,000 425,000 21 89,250 % Gain or loss recognized Character Capital gain Ordinary income $30,000 ordinary income and $10,000 capital gain $20,000 ordinary income and $205,000 capital gain
Delta is an accrual basis, calendar year corporation. Maryssa formed the corporation six years ago by transferring $215,000 of cash in exchange for the Delta stock. Thus, she has held the stock for six years and has a $215,000 adjusted basis in the stock. Delta's balance sheet at January 1 of the current year is as follows: Assets Cash Marketable securities Inventory Equipment Building Total Liabilities and Equity Basis $ 495,000 50,000 330,000 230,000 540,000 $ 1,645,000 FMV 495,000 100,000 440,000 270,000 765,000 $ 2,070,000 Accounts payable 185,000 Common stock 215,000 1,245,000 Retained earnings (and E&P) $ 1,645,000 $ 2,070,000 Total Delta has held the marketable securities for two years. In addition, Delta has claimed $30,000 of MACRS depreciation on the machinery and $100,000 of straight-line depreciation on the building. 185,000 1,885,000
Maryssa owns 100% of Delta Corporation's common stock. (Click the icon to view the balance sheet.) On January 2 of the current year, Delta liquidates and distributes all property to Maryssa except that Delta retains cash to pay the accounts payable and any tax liability resulting from Delta's liquidation. Determine the tax consequences to Delta, Growing, and Maryssa. Let's begin by determining the tax consequences for Delta Corporation if it sells all property other than cash to Growing Corporation for FMV. Select the property needed to compute Delta's total gain or loss, compute the gain or loss for each asset, and determine the character for each gain or loss. Then, compute Delta's total gain or loss and compute Delta's tax liability. Gain or loss recognized Equipment Building Marketable securities Inventory Total Times: Tax rate Tax liability $ Amount 40,000 225,000 50,000 110,000 $ 425,000 21 89,250 Assume that Delta has no other taxable income or loss. Assume a 21% corporate tax rate. i (Click on the icon to view the tax consequences for Delta.) i (Click on the icon to view the tax consequences for Maryssa.) Read the requirement. % Character $30,000 ordinary income and $10,000 capital gain $20,000 ordinary income and $205,000 capital gain Capital gain Ordinary income