Through “Type A” reorganization, VizslaCo acquires 100% of Puli Corporation by exchanging 30% of its stock for all of Puli’s assets and liabilities. The VizslaCo stock was exchanged for all of the stock of the Puli’s shareholders. Then Puli liquidated. The net value of Puli’s assets at the time of the restructuring was $500,000, and the Federal long-term tax-exempt rate was 5%. Puli held business tax credit carryovers of $61,250. If VizslaCo is always in the 35% tax bracket, what is the value of these credits to VizslaCo assuming that it uses a discount rate of 8%? Hint: Use text Appendix F in your analysis.
Chapter 8
Question 33
Use information from question 32 below to get the answer for question 33:
The Chief consolidated group reports the following results for the tax year. Dollar amounts are listed in millions.
Parent SubOne Sub Two Sub Three Consolidated
Ordinary Income
Capital gain/loss $600
-0- $200
60 ($90)
(25) $850
§ 1231 gain/loss Separate taxable incomes 250
$850 -0-
$200 (50)
$150 – 0 –
( 90 )
with a $25 capital loss carryover 200
Consolidated taxable income
Consolidated Tax liability
Energy tax credit, from Sub One
Net tax due
$ 380
( 70)
$ 310
Determine each member’s share of the consolidated tax liability. All of the members have consented to use the relative taxable income method. Assume a 35% marginal tax rate.
Question 33
Assume the same facts as in Problem 32, except that the group members have adopted the relative tax liability tax-sharing method.
Chapter 9
Question 45
Elmwood, Inc., a domestic corporation, owns 15% of Correy, Ltd., a Hong Kong corporation. The remaining 85% of Correy is owned by Fortune Enterprises, a Canadian corporation. At the end of the current year, Correy has $400,000 in undistributed E & P and $200,000 in foreign taxes related to this E & P. On the last day of the year, Correy pays a $40,000 dividend to Elmwood. Elmwood’s taxable income before the dividend is $200,000. What is Elmwood’s tax liability after consideration of the dividend and any allowed FTC, assuming a 34% U.S. tax rate?
Appendix F.1
Appendix F.2

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