Parent Corporation Purchases All of Target Corporation's Stock for $200,000

question 26

Essay

Parent Corporation purchases all of Target Corporation's stock for $200,000 and makes a deemed liquidation election. Target Corporation has Class I assets with an adjusted basis of $55,000 and an FMV of $55,000; Class II assets with an adjusted basis of $40,000 and an FMV of $60,000; and Class V assets with an adjusted basis of $70,000 and an FMV of $100,000. The Class V assets are subject to a $20,000 liability. Assume a 34% corporate tax rate. What is the adjusted grossed-up basis of Target Corporation's stock?

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Definitions:

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Cost-Benefit Ratio

A financial assessment tool that compares the costs of an action or project to its benefits, to determine its feasibility or value.

Leverage Ratio

A financial metric indicating the level of a company's debt in relation to its equity or assets.

Organisational Performance

A measure of how well an organization achieves its objectives and fulfills its mission.