What is the tax treatment of ramas exchange

Assignment Help Accounting Basics
Reference no: EM13992893

1. Stork Corporation (E & P of $850,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Lana Johnson, 450 shares; Lori Johnson (Lana's sister), 450 shares; and Leo Johnson (Lana's son), 100 shares. Lana paid $200 per share for the Stork stock eight years ago. Lana is interested in reducing her stock ownership in Stork via a stock redemption for $1,000 per share, the fair market value of the stock. Stork Corporation would distribute cash for the entire redemption transaction. Lana has inquired as to the minimum number of shares she would have to redeem to obtain favorable long-term capital gain treatment and the overall tax consequences of such redemption to both her and Stork Corporation. Prepare a letter to Lana (1000 Main Street, St. Paul, MN 55166) and a memo for the file in which you explain your conclusions.

2. Tri Corporation and Angle Corporation are combining to form Triangle Corporation in a restructuring that qualifies as Type A consolidation reorganization. Tyron, the sole shareholder of Tri, has a basis of $250,000 in his stock, which he purchased 10 years ago. Anna, the sole shareholder of Angle, also has a basis of $250,000 in her stock. She purchased the stock four months ago. Tri transfers all of its assets valued at $650,000 (adjusted basis of $280,000) and $250,000 in liabilities to Triangle for $50,000 in cash and $350,000 in Triangle stock. Angle transfers all of its assets valued at $250,000 (adjusted basis of $200,000) and $50,000 in liabilities to Triangle for $30,000 in cash and $170,000 in Triangle stock. Upon completion of the consolidation, the Triangle stock and cash are transferred to Tyron and Anna, and both Tri and Angle cease to exist by operation of law. Determine the gain or loss that Tri, Angle, Tyron, Anna, and Triangle recognize from the reorganization. What are Triangle's bases in the assets it receives and Tyron's and Anna's new bases in their Triangle stock?

3. Sahara Corporation acquires Oasis Corporation in a Type A reorganization by exchanging 35% of its stock for all of the Oasis assets (fair market value of $950,000), liabilities ($300,000), and accumulated E & P ($140,000). Rama, a 60% shareholder of Oasis, exchanges her interest in Oasis (basis of $225,000) for Sahara stock and $100,000 cash. What is the tax treatment of Rama's exchange of Oasis stock for Sahara stock and cash?

Reference no: EM13992893

Questions Cloud

Deluxe company expects to pay a dividend of $2 : Deluxe Company expects to pay a dividend of $2 per share at the end of year-1, $3 pers share at the end of year-2 and then be sold for $32 per share. If the required rate on the stock is 15%, what is the current value of the stock?
Briefly explain the major types of exchanges : Briefly explain the major types of exchanges prevalent in the USA.
What is the current value on stock : World-Tour Co. has just now paid a dividend of $2.83 per share (D0); the dividends are expected to grow at aconstant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the..
What is the difference between direct paper and dealer paper : What is the difference between direct paper and dealer paper?
What is the tax treatment of ramas exchange : What are Triangle's bases in the assets it receives and Tyron's and Anna's new bases in their Triangle stock? What is the tax treatment of Rama's exchange of Oasis stock for Sahara stock and cash?
Describe the osi model and its purpose : Describe the OSI model and its purpose. Be sure to describe each layer and that layer's function. Which OSI layer(s) do(es) modulation? Which OSI layer(s) do(es) segmentation? Which OSI layer(s) do(es) collision detection?
Relational schema : What would be the correct answer for them? For questions x - y refer to the following relational schema: Which of the following statements is true? (a)  a key is a superkey (b)  a candidate key is a superkey (c)  a primary key is a superkey (d)  all ..
A squab is meant to represent a creature in a computer game : A Squab is meant to represent a creature in a computer game that is played on a rectangular grid. Positions on the grid are specified by two coordinates (x and y). Directions are represented by four letters: N, S, E and W. Movement in direction E cau..
Explain what a computer back up means : Explain what a computer back up means and why it is so important in a medical office environment

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd