The Stock of Tan Corporation (E & P of $800,000)is

question 57

Essay

The stock of Tan Corporation (E & P of $800,000)is owned as follows: 85% by Egret Corporation (basis of $470,000),and 15% by Zoe (basis of $45,000).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 $870,000,basis of $950,000)and equipment (fair market value of $405,000,basis of $280,000)to Egret Corporation,and securities (fair market value of $225,000,basis of $250,000)to Zoe.What are the tax consequences of these distributions to Egret,to Tan,and to Zoe?

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Definitions:

Interest

The charge for borrowing money or the return on invested capital, typically expressed as a percentage.

Present Value

The here and now worth of a future financial sum or cash inflow sequences, discounted at a defined rate of return.

Growing Annuity

A series of regular payments that grow at a consistent rate over time, commonly used in retirement and investment calculations.

Rate of Return

Earnings or losses seen on an investment during a fixed interval, presented as a percentage of the investment's first cost.