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Part 1: Zimba receives the following assets: Cash $100,000, land at $50,000 and the building at $30,000 bases. The cash and land go in at carryover basis, the building goes in at Dr. Evil’s basis plus the gain he recognizes ($10,000) from the debt relief. Aluga corp gets its stock at $100,00 basis, Spiderman gets his stock at $50,000 basis, and Dr. Evil gets his at $30,000 basis.
Part 2: The distributions are deemed first from current E&P since they were paid in 2013. As such, The $40,000 E & P was only half earned through 2013. Of the $90,000 total distributed, $20,000 is dividend return of E & P. The remainder, $70,000, is return of capital, $23,333 for each shareholder. There is no tax issue for Zumba Corp.
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