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Homework answers / question archive / Cerulean Corporation has two equal shareholders, Marco and Avery
Cerulean Corporation has two equal shareholders, Marco and Avery. Marco acquired his Cerulean stock three years ago by transferring property worth $700,000, basis of $300,000, for 70 shares of the stock. Avery acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000, basis of $110,000. Cerulean Corporation's accumulated E & P as of January 1 of the current year is $350,000. On March 1 of the current year, the corporation distributed to Marco property worth $120,000, basis to Cerulean of $50,000. It distributed cash of $220,000 to Avery. On July 1 of the current year, Avery sold her stock to Harpreet for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Harpreet and Marco. What are the tax issues?
The tax issues are as follows:
Did any of the property have depreciation on it, if yes, what profit or loss will the company recognize and how will E & P be affected?
Under SS351, any of the exchanges qualify?
Do the distribution count as dividend or return capital?
Balance on current and accumulated E & P ?
Are there Any loans on property distributed and if so, were they assumed by the recipients?
