On March 1, Cream Corporation Transfers All of Its Assets

question 55

Essay

On March 1, Cream Corporation transfers all of its assets to Coffee Corporation in exchange for 10% of its common voting stock. At the time of the reorganization, Cream has assets valued at $4 million basis of $3 million), and its earnings and profits account shows a deficit of $650,000. Coffee's earnings and profits as of March 1 were
$420,000. Due to the reorganization, Coffee has an NOL for the current year of $150,000. Coffee still declares its usual dividends of $100,000 paid on April 30, August 31, and December 31 $300,000 of total dividends).
How are the Coffee shareholders taxed on the distribution?

---

Definitions:

Cognitive Processes

Mental activities that include thinking, understanding, learning, and remembering.

Introspection

Deliberate looking into one’s own cognitive processes to examine one’s thoughts and emotions.

Continuous Reinforcement

A schedule of reinforcement in which every correct response is reinforced.

Household Chore

A household chore is a task or duty that is typically performed in and around one's home, such as cleaning, cooking, or gardening, often regarded as part of the routine maintenance of the household.