Tax Memo E

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 24% on Turnitin will be rejected subject to the professor’s review and sole discretion. AI % will be an F

Questions:

Warren Buffoon, Bill Yates, Jeff Blaze, Mark Stuckerberg and Ion Must formed the Rocket to Mars Corporation (RMC). Each contributed $10 million in exchange for 20% of RMC’s stock. None were dealers in stock and held their respective investments as a capital asset. After a shareholder dispute over who would pilot the next rocket ship into outer space, the shareholders decided to liquidate the company. RMC adopted a plan of complete liquidation.

RMC distributed assets pursuant to the plan with a basis to the corporation of $50 million and a fair market value of $125 million. Each shareholder received a pro rata share in the distribution. At the time of the liquidation, RMC had $125 million in earnings and profits.

1.What are the tax consequences to RMC upon liquidation?

2.What are the tax consequences to the shareholders upon liquidation?

Assume the same facts except, however:

3.How would the answers to 1 and 2 change if the assets distributed in liquidation had a FMV of $30 million instead of $125 million?

Assume the same facts except instead of distributing the assets, RMC sold the assets to a third party:

4.The assets are sold for $30 million, and the cash is then distributed pro rata to the 5 shareholders. What are the tax consequences to both RMC and to the shareholders?

5. How would the answers in 1 and 2 change if the shareholders took the property in liquidation subject to a $100 million mortgage?

Tax Research Memo
Sample Format
Your Firm
Your Town and State
Date
Relevant Facts
This section should summarize the important facts of the research case. Only
include the relevant facts in a clear and concise manner.
Specific Issues
Identify the issue(s) and state the issue(s) in the form of a question.
Conclusions
Think of your conclusion as the “short” answer to your issue. The conclusion
section is the place to provide tax advice, recommend action(s) for the client to take,
or identify the need for additional information. There may not be a single “best”
alternative to the client’s issue so be sure to consider all applicable alternatives.
Support your conclusion by referencing back to the authority you discussed in the
discussion and analysis section.
Support
This section discusses the issue(s). Begin with the relevant code section(s).
Identify the code section, paraphrase what it says and then discus why it’s
important. Discussion of the relevant Treasury Regulations should follow. Identify the
regulation, paraphrase the important sections, and then address the importance of
the regulation given the facts.
The discussion
should continue by
reviewing relevant Treasury
pronouncements (Revenue Rulings, Revenue Procedures, Letter Rulings, etc.) and
cases. Be sure to include complete cite for each authority. Summarize the important
facts for the pronouncement/case and then compare the facts of the
pronouncement/case to the research facts. Discuss how the facts are similar or
different. Explain how each ruling or case supports or weakens the clients’ position.
Documentation is a very important part communicating tax research and all
statements or opinions should be substantiated with supporting cites. Supporting
cites should be to primary sources only except in rare or unusual situations.