Wolverine Corporation made a distribution of $500,000 to Jim Har Inc. in partial

Question

Wolverine Corporation made a distribution of $500,000 to Jim Har Inc. in partial liquidation of the company on December 31 of this year. Jim Har Inc. owns 100 percent of Wolverine Corporation. The distribution was in exchange for 50 percent of Jim Har Inc.’s stock in the company. At the time of the distribution, the shares had a fair market value of $200 per share. Jim Har Inc.’s income tax basis in the shares was $50 per share. Wolverine had total E&P of $8,000,000 at the time of the distribution.

1. What is the amount and character (capital gain or dividend) of any income or gain recognized by Jim Har Inc. as a result of the partial liquidation?

2. Assuming Wolverine made no other distributions to Jim Har Inc. during the year, by what amount does Wolverine reduce its total E&P as a result of the partial liquidation?

Explanation / Answer

Particular No share Share value Amount 1 Wolverine Corporation made a distribution 500,000 150 75000000 Profit 8,000,000 83000000 Earning per share Profit / No of shares 166

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.