Determine the tax consequences of this sale to bart

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Problem

Facts: Newco, Inc. is an electing S corporation that has been in existence since 2004. The S election has been in effect for all years. Newco has one shareholder, Bart Cromwell, and Bart's basis in his Newco shares is $4,300,000. Newco will sell its assets for $13,400,000. The consideration will have two components - cash of $2,000,000 delivered at closing, which is October 15, 2025, and a note issued by the buyer, Acquisitions, LLC, in the amount of $11,400,000 with interest at 5 percent. The note will be paid at the rate of 20% of the principal each year beginning in 2026. Bart anticipates filing a final tax return for Newco in 2025 and distributing the note as a liquidating distribution. Bart anticipates receiving an assignment of the future payments on the note (the note was made assignable for this purpose) in March 2026. The first payment on the note will occur in October 2026. You can assume that ALL assets of Newco qualify for installment reporting. The tax basis of the Newco assets is $4,300,000, the same as the basis of the stock to Bart. Get the instant assignment help. Determine the tax consequences of this sale to Bart, including any gain.

Reference no: EM133928364

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