A and B each has owned 50% of the stock of X Corp for many years A’s stock basis is $800 with a FMV of $1,000 and B’s stock basis is $1,200 with a FMV of $1,000 X Corp is engaged in two lines of business, both for over 5 years, the manufacture of electronics equipment (Electro), and the manufacture of air conditioners (Airco) The assets of each division have a FMV of $1,000 and an adjusted basis of $500 X Corp has no liabilities and an E&P of $1,000 What are the tax consequences of the following transactions?
A) X Corp transfers all its Electro assets into a newly formed Y Corp for all of Y Corp’s stock and all the Airco assets into a newly formed Z Corp for all of Z Corp’s stock Immediately thereafter, X Corp liquidates and distributes Y Corp and Z Corp stock ratably between the shareholders
B) Would your answer be different if the Y Corp stock was distributed to A and the Z Corp stock was distributed to B?
C) What if the same occurred in B above, but Y Corp assets were sold immediately after the transfer?
D) X Corp transfers the Electro assets to Y Corp, a newly formed corp, in exchange for all of Y Corp’s stock Immediately thereafter, X transfers all of Y Corp’s stock to B for all of B’s stock What are the ramifications?
E) What if under D above, B sells Y Corp’s stock to another unrelated party immediately after the split? 2 years after the split? 5 years after the split?