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.
This year Red Button and Clothing had a disagreement on the direction of the company.Consequently, Red has decided that he would like to take the tie business and go his separate way.The most logical form that this transaction should take is a partial liquidation.

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.
This year Red Button and Clothing had a disagreement on the direction of the company.Consequently, Red has decided that he would like to take the tie business and go his separate way.The most logical form that this transaction should take is a partial liquidation.

Quizplus · Accepted Answer

Given the scenario, the most logical form for this transaction would be a spin-off or a division, where the tie business is separated from Apparel Corp. and transferred to Mr. Red Button, allowing both entities to operate independently. A partial liquidation typically involves the distribution of assets to shareholders and does not align with the intention of continuing the tie business separately.

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