Tester Corporation Acquired All of the Stock of Socco Corporation

question 148

Essay

Tester Corporation acquired all of the stock of Socco Corporation five years ago for $400,000.Socco Corporation has been completely liquidated this year,and all of its assets have been transferred to Tester Corporation.Immediately prior to the liquidation,Socco had an adjusted basis in its assets of $560,000,and the assets were worth $700,000.
a.How much gain or loss will Socco recognize due to the liquidation?
b.How much gain or loss will Tester recognize due to the liquidation?
c.What is Tester's adjusted basis in the assets received from Socco?

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Definitions:

Average Cost

The total cost of production divided by the number of units produced, representing the cost per unit.

Shares

Units of ownership in a company or financial asset, giving shareholders a portion of the company's profits and voting rights.

PST

Depending on the context, this could stand for Pacific Standard Time, which is the time zone observed on the west coast of the United States, or Provincial Sales Tax, a tax imposed by some Canadian provinces.

GST

Goods and Services Tax; a value-added tax levied on most goods and services sold for domestic consumption.