Essay Assignment: Section 338 Election and an Inventory Sale
Length: 5 pages.
Harrison Corporation, a C corporation, is part of a consolidated group, with assets consisting of inventory with a pre-transaction tax basis of $3,200 and value of $40,000. Harrison also has $3,200 of liabilities. Debra Smith acquires 100% of Harrison's outstanding stock for $36,800, and the parties make a Sec. 338(h)(10) election. Prepare a letter to Debra that answers the following questions:
o What is Harrison Corp.'s adjusted grossed-up basis (AGUB)?
o What is the inventory's allocated tax basis?
o How much gain will be realized when the inventory is sold?
Include your calculations in the memo or attach a spreadsheet showing your calculations.
Format your assignment according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.
References
o Chapter 20 in South-Western Federal Taxation 2019
o Aggregate Deemed Sale Price; Various Aspects of Taxation of the Deemed Asset Sale, 26 CFR 1.338-4
o Caiazza, S., & Pozzolo, A. (2016). The determinants of failed takeovers in the banking sector: Deal or country characteristics? Journal of Banking & Finance, 72(SS), S92-S103.
o Seago, W. E., & Schnee, E. J. (2018). Post-reorganization transactions and the step transaction doctrine. Journal of Taxation, 128(1), 6-13.
o Certain stock purchases treated as asset acquisitions, 26 U.S. Code § 338(h)(10) (n.d.). Retrieved from Thomson Reuters Checkpoint database.
o Complete liquidations of subsidiaries, 26 U.S. Code § 332 (n.d.). Retrieved from Thomson Reuters Checkpoint database.