The Stock of Tan Corporation (E & P of $1

question 19

Essay

The stock of Tan Corporation (E & P of $1.5 million) is owned as follows: 90% by Egret Corporation (basis of
$900,000), and 10% by Zoe (basis of $70,000). Both shareholders acquired their shares in Tan more than six years ago. In the current year, Tan Corporation liquidates and distributes land (fair market value of $1.1 million, basis of $1.3 million) and equipment (fair market value of $700,000, basis of $410,000) to Egret Corporation, and securities (fair market value of $200,000, basis of $260,000) to Zoe. What are the tax consequences of these distributions to Egret, to Tan, and to Zoe?

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Definitions:

Equal Protection

A constitutional principle that states no individual or group should be denied the same protection of the laws that is enjoyed by other individuals or groups.

Street Vendors

Individuals who sell goods or food in public places, often from a cart, table, or small stall.

Market Town

A town that traditionally holds markets, providing a trading venue for the people in the surrounding area.

Substantive Due Process

A constitutional principle that protects individuals from the government's infringement on fundamental constitutional liberties.