Bluebird Corporation Owns and Operates Busses and Has Decided to Liquidate

question 34

Essay

Bluebird Corporation owns and operates busses and has decided to liquidate its operations. Victor, who owns 80% of the company's stock, will receive all of the busses, repair parts inventory, and all tools and equipment. He plans to start a bus company in another town. Penny, who owns 20% of the stock, wants nothing to do with the new bus business and will receive a cash distribution. Bluebird will incur about $20,000 of expenses in connection with the liquidation. What tax issues should Victor, Penny, and Bluebird consider with respect to the liquidation?

---

Definitions:

Catalyst

A substance that increases the rate of a chemical reaction without being consumed or altered permanently in the process.

Semipermeable Membrane

A type of membrane that allows certain molecules or ions to pass through by diffusion but not others.

Osmotic Pressure

Amount of turgor that prevents osmosis into cytoplasm or other hypertonic fluid.

Receptor-Mediated Endocytosis

A cellular process where specific molecules are ingested into the cell after they bind to receptors on the cell surface.