The Assets of Bold Corporation Have a $1,000,000 Basis and a $3,000,000

question 17

Essay

The assets of Bold Corporation have a $1,000,000 basis and a $3,000,000 FMV. Its liabilities are $500,000. Tidel Corporation acquires 80% of the Bold Corporation stock for $2,000,000. What gain is recognized by Bold Corporation if a timely Sec. 338 election is made by Tidel Corporation? What is the total basis of the assets to Bold Corporation following the deemed sale? Assume a 34% corporate tax rate.

---

Definitions:

Windfall Profit Tax

A windfall profit tax is a higher tax rate applied to unexpected or unusually large profits generated by companies, often imposed during periods of economic boom or due to geopolitical events affecting commodity prices.

Dividend

Dividend is a portion of a company's earnings that is paid to shareholders, usually on a regular basis.

Cooperatives

An organization owned and operated by a group of individuals for their mutual benefit.

Market Value

The present cost at which a service or asset may be purchased or sold in the marketplace.