Canary Corporation

by | Aug 22, 2021 | Assignment Help

There is no word limit”Canary Corporation wholly owns Parrot Corporation, formed six years ago with the transfer of several assets and a substantial amount of cash. Canary’s basis in the Parrot stock is $10.5 million. Since it was formed, Parrot has been a very successful manufacturing company and currently has accumulated E & P of $8 million. The company’s principal assets are property, plant and equipment (worth $10 million) and cash and marketable securities of $8.5 million, for a total fair market value of $18.5 million.Canary and Parrot are members of an affiliated group and have made the election under §243 (b) to entitle Canary to a 100% dividends received deduction. From a strategic perspective, Canary is no longer interested in manufacturing and is considering a sale of Parrot. In anticipation of a sale int eh next year or two, the management of Canary has contacted you for advice. If Parrot is sold outright, Canary Corporation will have a capital gain of $8 million ($18.5 million fair market value less a basis of $10.5 million). As an alternative, taxes on a future sale would be minimized if Parrot first pays Canary an $8 million dividend equal to its E & P. With the 100$ dividends received deduction, the payment would be tax-free to Canary. Subsequent to the dividend payment, Parrot can be sold for its remaining value of $10.5 million ($10 million in property, plant, and equipment plus $500,000 in cash), resulting in no gain or loss to Canary.a. Prepare a letter to the president of Canary Corporation describing the results of the proposed plan. The president is Thelma Raisbeck, 1914 Broom Street, Wauwatosa, WI 53786.b. Prepare a memo for your firm’s client files.Partial list of research aids:Waterman Steamship Corp. v. Comm., 70-2 USTC ¶9514, 26 AFTR 2d 70-5185, 430 F.2d 1185(CA-5, 1970)”

This is a sample question

Need help with a similar assignment?

Place an order at Study Pirate

Attach all custom instructions.

Make Payment. (The total price is based on number of pages, academic level and deadline)

We’ll assign the paper to one of writers and send it back once complete.