Corporate tax : Tax Consequences of a Corporate Liquidation | Homework Helpers

Corporate tax : Tax Consequences of a Corporate Liquidation

Project description
Tax Consequences of a Corporate Liquidation
Read the scenario and data, and then respond in writing to the two questions below.
Pamela owns 100% of Sigma Corporation’s stock. She purchased her stock 10 years ago, and her current basis for the stock is $300,000. On June 10, Pamela decided to liquidate Sigma.
Click here to see Sigma’s balance sheet.
The corporation has claimed depreciation of $150,000 on the equipment.
The corporation received the marketable securities as a capital contribution from Pamela three years earlier at a time when its adjusted basis was $90,000 and their FMV was $70,000.
Sigma incurred $20,000 in liquidation expenses in its final tax year.
What are the tax consequences of the liquidation to Pamela and Sigma Corporation? Assume a 34% corporate tax rate.
How would your answer change if Pamela contributed the marketable securities six years ago?
Answer the two questions in detail, supporting your assertions with calculations based on the data provided. Your response should be 2 pages long. You should answer the two questions above. Use Arial 12-point font and double spacing.

Submission Requirements:
Please submit the completed assessment to the Week 2 assessment area as a Word attachment.

Sigma’s balance sheet prior to the sale of the assets, payment of the liquidation expenses, and payment of federal income taxes is as follows:
ASSETS
BASIS
FMV
Cash
$240,000
$240,000
Marketable securities
$90,000
$80,000
Equipment
$150,000
$200,000
Land
$320,000
$680,000
Total
$800,000
$1,200,000
EQUITY
Common stock
$300,000
$1,200,000
Retained earnings (and E&P)
$500,000
Total
$800,000
$1,200,000