Parent Corporation Purchases All of Target Corporation's Stock for $200,000

question 11

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.
Assuming that the adjusted grossed-up basis is $237,000 ($200,000 + $20,000 + $17,000 federal income taxes), what is the allocation of adjusted grossed-up basis to Class VI assets?

---

Definitions:

Nutraceuticals

Food-based items that come with extra health perks over and above what's typically found in the nutritional makeup of foods.

St. John's Wort

A herbal remedy often used for treating depression and various conditions due to its believed antidepressant properties.

Melatonin

A hormone released by the pineal gland when a person’s surroundings are dark.

Black Cohosh

A herb often used to manage symptoms of menopause and menstrual discomfort due to its supposed estrogen-like effects.