Question

3. In year 3, the corporation liquidates their operations and the following information is provided Accumulated E and P 150,000 Fair Market value of building $550,000 Basis of stock: Jill $550,000, John 500,000, Paul 27,500 The distribution is as follows: Jill receives $525,000, Paul receives $50,000 and John receives the building in a total liquidation process. 12. What are the tax ramifications to J and J Corporation

Answer 1

Shareholders Stock Held % to Total Stock

Jill $500,000 48.66%

John $500,000 48.66%

Paul $27,500 2.68%

Total Stock $1,027,500 100.00%

Total Distribution

Jill $525,000

John $550,000

Paul $50,000

Total $1,125,000

Tax Ramifications to J and J Corporation

Shareholder Base $1,027,500

Distribution $1,125,000

Capital Loss to J and J Corporation $97,500

Since distribution to shareholders was more than the contributions by shareholders, J and J Corporation will bear the Capital Loss as a result of such distribution.