ACC 4020 Week 4 Assignment 2 Pink Corporation Updated
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acc 4020 week 4 assignment 2 pink corporation new
Situation 1
Pink Corporation acquired land and securities in a §351 tax-free exchange in 2011. on the date of transfer, the land had a basis of $720,000 and a fair market value of $1 million, and the securities had a basis of $110,000 and a fair market value of $250,000. Pink Corporation has two shareholders, Maria and Paul, who are unrelated. Maria owns 85% of the stock in the corporation, and Paul owns 15%. Pink adopts a plan of liquidation in 2012. On this date, the value of the land has decreased to $500,000. What is the effect of each of the following on Pink Corporation? Which option should be selected? Justify.
Situation 2
At the time of its liquidation under §332, Pink Corporation (earnings and Profits of $560,000) had the following assets and liabilities: cash ($175,000), marketable securities (fair market value of $230,000 basis of $250,000), unimproved land (fair market value $600,000 basis of $300,000), unsecured note payable ($50,000), and mortgage on the unimproved land ($270,000). Pink Corporation also had a net operating loss carryover of $45,000. Wren Corporation acquired all of the stock of Pink Corporation seven years ago $160,000.