Question

In: Accounting

Sweet and Salty corp is a holding company (HoldCo) with two subsidiaries. One sub (Salty) produces...

Sweet and Salty corp is a holding company (HoldCo) with two subsidiaries. One sub (Salty) produces salty snacks and the other (Sweet) produces healthy sweet soft drinks. Tastebud an individual owns 60% of HoldCo. In which she has a basis of $6,000. She feels that the emphasis on healthy food is causing Hold Co’s stock to be depressed in value. She proposes that Hold Co distribute Salty to the shareholders ratably so that each shareholder will own their proportionate amount of each company. Hold Co’s basis in Salty is $25. HoldCo distributes the shares of Salty and Taste receives 60 of the 100 shares of Salty. Immediately after the distribution Tastebud’s Salty shares are worth $30,000 and her Sweet shares are worth $70 000.

1. Does the distribution cause HoldCo to recognize gain or loss (the total value of the Salty shares distributed was $50,000) if so how much and if not, why not?

2. How much if any gain or loss does Tastebud recognize on receipt of the Salty shares?

3. What is Tastebud’s adjusted basis in the Salty shares received?

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

One main feeder have two sub feeders (Sub Feeder-A and Sub Feeder-B). If the Sub Feeder-A...
One main feeder have two sub feeders (Sub Feeder-A and Sub Feeder-B). If the Sub Feeder-A has demand at a time to be 35 kW and Sub Feeder-B has demand at a time as 42 kW, calculate the total individual maximum demand (MD), the demand of the whole system and the diversity factor if the maximum demand of the main feeder is recorded as 70 kW. Explain the possibility of having the main feeder’s MD to be equal with the...
Simms Corp. controlled four domestic subsidiaries and one foreign subsidiary. Prior to the current year, Simms...
Simms Corp. controlled four domestic subsidiaries and one foreign subsidiary. Prior to the current year, Simms Corp. had excluded the foreign subsidiary from consolidation. During the current year, the foreign subsidiary was included in the financial statements. How should this change in accounting entity be reflected in the financial statements?
Euromarket investment and fund raising   A​ U.S.-based multinational company has two​ subsidiaries, one in Mexico​ (local...
Euromarket investment and fund raising   A​ U.S.-based multinational company has two​ subsidiaries, one in Mexico​ (local currency, Mexican​ peso, MP) and one in Japan​ (local currency,​ yen, ¥). Forecasts of business operations indicate the following​ short-term financing position for each subsidiary​ (in equivalent U.S.​ dollars): ​Mexico: $85 million excess cash to be invested​ (lent) ​Japan: $70 million funds to be raised​ (borrowed) The management gathered the following​ data: Spot exchange rates MP11.56/US$ ¥108.57/US$ Forecast percent change -2.98% +1.54% Interest rates...
2) Vision Group is a parent company with a number of wholly owned subsidiaries. One of...
2) Vision Group is a parent company with a number of wholly owned subsidiaries. One of these, Courts Fiji Ltd, is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout the Pacific. While the Vision group prepared its financials for the year ended 30 June 2017 the accounts included all the subsidiaries except Courts Fiji Ltd which was attached separately. The Financials included a note stating that the senior executives believe it would be misleading to consolidate Courts Fiji...
Problem 3 Krystal Klear Corp. produces two types of water filters. One attaches to the faucet...
Problem 3 Krystal Klear Corp. produces two types of water filters. One attaches to the faucet and the other is a pitcher-cum-filter that only purifies water for drinking. The unit that attaches to the faucet is sold for $ 100 and has variable costs of $ 35. The pitcher-cum-filter sells for $ 120 and variable costs of $ 30. The firm sells two faucet filters for every three pitchers sold. Fixed costs total $ 1,200,000. a.   What is the breakeven...
Armstrong Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain...
Armstrong Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain model and a racing model. At the beginning of the year, the following data were prepared for this plant: Mountain Racing Quantity 250,000 125,000 Selling Price $1,200 $1,000 Unit Prime Cost $ 400 $ 500 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Activity Cost Racing Mountain Machining Machine hours $20,000,000...
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers:...
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant: Deluxe Regular Quantity 100,000 800,000 Selling price $900 $750 Unit prime cost $529 $483 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Deluxe Regular Activity Cost Setups Number of setups 300 200...
Howard Company produces a variety of electronic equipment. One of its plants produces two dot matrix...
Howard Company produces a variety of electronic equipment. One of its plants produces two dot matrix printers, the superior and the regular. At the beginning of the year 2013, the following data were prepared for this plant:                                                                         Superior                       Regular                         Quantity                                   50,000                         400,000                         Selling price                            $475.00                           $300.00                         Unit prime cost*                      $180.00                           $110.00                         Unit overhead cost                     $20.00                          $130.00                         Prime cost equals direct materials and direct labor.                                 The unit overhead...
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers:...
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: The Deluxe and the Regular. At the beginning of the year 2019, the following data were prepared for this plant: Deluxe Regular Quantity 20 000 80 000 Selling price $90 $75 Unit direct cost $53 $48 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity name Activity Cost Activity driver Deluxe Regular Set-up $200,000 Number...
Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic...
Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the year, the following data were prepared for this plant: Basic Model Deluxe Model Expected quantity 40,000 20,000 Selling price $180 $360 Prime costs $80 $160 Machine hours 5,000 5,000 Direct labor hours 10,000 10,000 Engineering support (hours)...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT