Chip and Dale Are Each 50% Owners of Tree Corporation

question 26

Essay

Chip and Dale are each 50% owners of Tree Corporation, a holding company. They have each held their stock since the company was formed five years ago. Tree's money is invested almost entirely in stocks, bonds, rental real estate, and land. All of the stocks are traded on the New York Stock Exchange except for 1,000 shares of Conifer Corporation stock. Conifer is privately held by 50 individuals. Last year, Conifer reported about $2 million in net income. During a meeting with Chip and Dale, you discover that they plan to liquidate Tree Corporation as soon as possible to avoid the personal holding company tax. What tax issues should Chip and Dale consider with respect to this liquidation?

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Definitions:

Striation

A series of ridges, furrows or linear marks, often found in muscle tissues or rocks.

Ligamentum Arteriosum

A small ligament that is a remnant of the ductus arteriosus, connecting the pulmonary artery to the descending aorta in the fetal circulation system.

Fossa Ovalis

The fossa ovalis is an anatomical feature of the heart, a depression in the right atrium wall, marking the spot where an opening, the foramen ovale, existed in the fetal heart.

Papillary Muscle

Muscles located in the ventricles of the heart, attaching to the cusps of the atrioventricular valves via chordae tendineae and preventing valve inversion.