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:

Mucopurulent Chronic Bronchitis

A long-term inflammation of the bronchial tubes in the lungs, characterized by coughing with mucus and pus production.

Tobacco User

An individual who regularly uses tobacco products, which can include smoking cigarettes, cigars, or using smokeless tobacco.

Acute Respiratory Failure

A sudden and life-threatening inability of the lungs to provide adequate oxygen to the blood or remove carbon dioxide from the body.

Chronic Respiratory Failure

A long-term condition where the lungs cannot exchange gases effectively, leading to low oxygen or high carbon dioxide in the blood.