Option #2: Tax Impacts of a Corporate Liquidation
IRC Sec. 336(a) provides that a corporation will recognize gain or loss when it distributes property in complete liquidation. X Corporation makes a liquidating distribution to A, an individual and its only shareholder of a piece of land that has an adjusted basis of $80,000 and a fair market value of $200,000. A’s basis in its X shares is $20,000. What is the tax impact of this transaction to X Corporation? What is the tax impact to A? How would your answer change if the distributed property was subject to a $50,000 mortgage?
Your assignment should be a paper 2-3 pages long, not including the required title and reference pages. Adhere to the CSU Global Writing Center (Links to an external site.). Include at least three scholarly sources (you may use the recommended readings) to support your answers. The CSU Global Campus Library (Links to an external site.) is a good place to find these sources. Remember to use in-text citations as appropriate and to include your sources in your reference page.
To support any gain or loss calculations, please include all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make effective use of comments to convey your thought process as well. No hard coding of solutions. Submit a single MS Excel file for grading.