Clothing Inc.and Mr.Red Button formed Apparel Corp.in 1960.It is engaged in the manufacture and sale of shirts and ties.Apparel acquired the tie business from Silk Inc.Now it desires to get out of the tie business but continue in the shirt business.The primary assets of the tie business are: $\begin{array} { l }
\text { Assets }&\text { Adiusted Basis }&\text { Fair Market Value }\
\text { Plant }&\$60,000&\$200,000\\text { Equipment }&20,000&45,000\
\text { Truck }&15,000&8,000
\end{array}$
Assume all necessary requirements are satisfied unless otherwise stated or implied.
Sale treatment is assured for some shareholders if the tie business was acquired in a nontaxable merger three years ago.

Question

Clothing Inc.and Mr.Red Button formed Apparel Corp.in 1960.It is engaged in the manufacture and sale of shirts and ties.Apparel acquired the tie business from Silk Inc.Now it desires to get out of the tie business but continue in the shirt business.The primary assets of the tie business are: $\begin{array} { l  }
\text { Assets }&\text { Adiusted Basis }&\text { Fair Market Value }\
\text { Plant }&\$60,000&\$200,000\\text { Equipment }&20,000&45,000\
\text { Truck }&15,000&8,000
\end{array}$
 Assume all necessary requirements are satisfied unless otherwise stated or implied.
Sale treatment is assured for some shareholders if the tie business was acquired in a nontaxable merger three years ago.

Quizplus · Accepted Answer

If the tie business was acquired in a nontaxable merger three years ago, it may qualify for sale treatment under certain conditions, such as meeting the continuity of interest and continuity of business enterprise requirements, which can provide favorable tax treatment for shareholders.

Clothing Inc Assume All Necessary Requirements Are Satisfied Unless Otherwise Stated or in the Manufacture