TAX MEMO D

PLEASE FOLLOW ALL INSTRCTIONS

Tax Memo D
Instructions:
This is an individual assignment. The memo should not exceed two pages and students
should use the tax memo template provided. However, the answer should be a full 2 pages
(double spaced, times new roman 12pt., 1-inch margins) Do not repeat the question in the
answer. Each memo must include an explanation of the relevant code sections, regs and/or
other relevant controlling authority such as case law. Don’t just cite the rules or cases,
explain them and their application to the specific facts in the questions. Any memo with a
similarity score exceeding 25% on Turnitin will be rejected subject to the professor’s
review and sole discretion. All tax memos are due on Saturday of each week assigned.
Questions:
1. Threads Inc. wants to buy TicTak Corp. for $500. Purls (the sole shareholder of TicTak)
wants to receive $2,000 for his 200 shares. TicTak has $1,500 available in cash and can
redeem 150 of Purl’s shares for $1,500. Immediately after the redemption, Threads buys
Purl’s remaining 50 shares for $500. At the end of the two transactions, Threads owns
100% of the shares in TicTak. What is the tax treatment to Purl? Applying Zenz, what is
the buyer’s bass?
2. Assume the facts as in Question 1 except, if Threads bought all shares of TikTac without
any redemptions, would Thread’s basis in the stock be different?
3. If Thread is intending to resell the TicTak stock for $3000 after the acquisition, would
you advise Thread to acquire the stock in a Zenz transaction or without the redemption?
Why or why not?
Tax Research Memo
Sample Format
Your Firm
Your Town and State
Date
Relevant Facts
Specific Issues
Conclusions
Support