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

question 11

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.
Assuming that the adjusted grossed-up basis is $237,000 ($200,000 + $20,000 + $17,000 federal income taxes), what is the allocation of adjusted grossed-up basis to Class VI assets?

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Definitions:

Conditions

Specific circumstances or factors affecting the way in which people live or work, especially with regard to their well-being.

Soft Determinists

Philosophers who believe that while human behavior is influenced by external factors, individuals still possess the ability to make choices, blending determinism with free will.

Determinism

The belief in philosophy that every event, including decisions on moral issues, is fully predetermined by preceding causes.

Compatible

The ability of two or more concepts, systems, or devices to work together without conflict or incompatibility.