Question 1. Joe has received an offer to sell his company to Microsoft Inc. for $40 million. The selling price will consist of 20% cash and the balance in Microsoft stock. Joe asks your advice on the different tax structure possibilities for the sale of the company and your recommendation for which method he should consider?
Question 2. a) Mary and Peter formed a new corporation MP, INC on February 8, 2010 and did not elect Subchapter S. On December 20, 2010, they come to you and ask if an S corporation makes sense for them. MP Inc, earned $100,000 during 2010. Discuss the tax implication of making the S election for 2011.
b) If MP, Inc loses $100 in 2010; would your answer be different?
Question 3. One June 1, 2010, John sold his stock in LIU,Inc. to Apple, Inc for $5 Million. When the stock was sold, LIU had an unused net operating loss carry forward of $1,375,000. To what extent can Apple use the operating loss carry forward of LIU? (The long- term tax exempt interest rate is 7%)
Question 4. Leslie is an employee of Granger, Inc. a public company. During 2010, Leslie received qualified employee stock options to purchase the stock of Granger for $1 per share. On December 8, 2010 Leslie exercise her right to acquire 10,000 shares of Granger for $1. On this date, the fair market value of Granger was $5 per share. Discuss the tax consequences to Leslie at the grant date and exercise date.