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:

Local Variables

Variables declared within a function or block, accessible only in their scope.

Global Variables

Variables that are defined outside any function and can be accessed from any part of the program.

Declaration Statement

A statement in programming that specifies a variable's type (and optionally its initial value) without executing any logic.