Barb owns all 100 shares of Lattice Corporation stock having a $ 0.85 million FMV. Her...

Barb owns all 100 shares of Lattice Corporation stock having a $ 0.85 million FMV. Her basis in the stock is $ 450000. Lattice'sE&P balance is $ 400000. Nick would like to purchase the stock but wants only the corporation's non-cash assets valued at $ 700000. Nick is willing to pay $ 700000 for these assets.

Requirement a. What are the tax consequences to Barb,Nick,and Lattice if Nick purchases 75 shares of Lattice stock for $700,000 and Lattice redeems Barb's remaining 25 shares for $150,000cash?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Maureen owns all of the stock in Green Corporation. Green owns 10,000 shares of Micro Corporation,...

Maureen owns all of the stock in Green Corporation. Green owns 10,000 shares of Micro Corporation, whose value has increased by 1000% since they were purchased eight years ago. Maureen would like to have the shares distributed to her, but she wants to avoid the tax bill that would result if they were distributed as a dividend from Green Corporation. Her son, who is taking classes for his MBA, has suggested that she create Brown Corporation with herself as the...

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of...

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of $100. Yellow Corporation owns a rental building (its only asset) with a gross FMV of $1,000, subject to a nonrecourse mortgage of $400. Yellow’s adjusted basis in this building is $300. Yellow has $200 of E&P. Yellow is on the accrual method of accounting and reports on the calendar year. Yellow Corporation and Green Corporation do not report on a consolidated basis. Yellow Corporation...

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of...

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of $100. Yellow Corporation owns a rental building (its only asset) with a gross FMV of $1,000, subject to nonrecourse mortgage of $400. Yellows adjusted basis in the building is $300. Yellow has $200 of E&P. Yellow is on the accrual method of accounting and reports on the calendar year. Yellow Corporation and Green Corporation do not report on a consolidated basis. Yellow Corporation sells...

Raymond Mining Corporation has 8.9 million shares of common stock outstanding, 330,000 shares of 5% $100...

Raymond Mining Corporation has 8.9 million shares of common stock outstanding, 330,000 shares of 5% $100 par value preferred stock outstanding, and 151,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $37 per share and has a beta of 1.45, the preferred stock currently sells for $93 per share, and the bonds have 15 years to maturity and sell for 118% of par. The market risk premium is 7.7%, T-bills are yielding 4%, and...

Raymond Mining Corporation has 8.5 million shares of common stock outstanding, 290,000 shares of 4% $100...

Raymond Mining Corporation has 8.5 million shares of common stock outstanding, 290,000 shares of 4% $100 par value preferred stock outstanding, and 143,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $33 per share and has a beta of 1.25, the preferred stock currently sells for $95 per share, and the bonds have 10 years to maturity and sell for 114% of par. The market risk premium is 7.3%, T-bills are yielding 6%, and...

Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100...

Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100 par value preferred stock outstanding, and 161,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $91 per share, and the bonds have 10 years to maturity and sell for 113% of par. The market risk premium is 8.2%, T-bills are yielding 3%, and...

Harris Corporation is an all-equity firm with 100 million shares outstanding. Harris has $250 million in cash...

Harris Corporation is an all-equity firm with 100 million shares outstanding. Harris has $250 million in cash and expects future free cash flows of $85 million per year. Management plans to use the cash to expand the firm’s operations, which will in turn increase future free cash flows by 15%. If the cost of capital of Harris’ investments is 12%, how would a decision to use the cash for a share repurchase rather than the expansion change the share price?

Tern Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares, Russell owns 600 shares,...

Tern Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares, Russell owns 600 shares, Velvet Partnership owns 300 shares, and Yellow Corporation owns 400 shares. Marina and Russell, unrelated individuals, are equal partners of Velvet Partnership. Marina owns 25% of the stock in Yellow Corporation. a. Applying the § 318 stock attribution rules, determine how many shares in Tern Corporation each shareholder owns, directly and indirectly: Marina: Velvet Partnership: Russell: Yellow Corporation: b. Assume, instead, that Marina owns...

Arthur owns all 90 shares of Class A voting common stock and all 90 shares of...

Arthur owns all 90 shares of Class A voting common stock and all 90 shares of Class C nonvoting common stock of Clay Co. Bill owns all 10 shares of Class B voting common stock and all 10 shares of Class D nonvoting common stock of X. Does Arthur control Clay Co under § 368(c)? Can Clay Co make a Subchapter S election? What if the charter of Clay Co is amended so that Class D shares have 1/ 10...

Pink Corporation is a calendar year taxpayer. Pete owns one-third (100 shares) of Pink stock. His...

Pink Corporation is a calendar year taxpayer. Pete owns one-third (100 shares) of Pink stock. His basis in the stock is $ 25000. Cheryl owns two-thirds (200 shares) of Pink stock. Her basis in the stock is $ 40000. On June 10 of the current year, Pink distributes $ 40000 to Pete and $ 80000 to Cheryl. Determine the tax consequences of the cash distributions to Pete and Cheryl in each of the following independent situations: a. Current E&P of...

Subjects