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?

---

Definitions:

Statute of Frauds

A legal principle requiring certain types of contracts, such as those concerning real estate or lasting more than a year, to be in writing to be enforceable.

Sale of Land

The process of transferring ownership of a parcel of real estate from one party to another, typically involving a written contract and the payment of an agreed-upon price.

Domestic Agreements

Legal contracts between individuals in a personal relationship, outlining the terms of matters such as property division or spousal support.

Guarantee

A legal commitment to assume responsibility for another's fulfillment of an obligation if that party fails to do so themselves.