Lark Corporation is the sole shareholder of Plover Corporation,which it hopes to sell within the next three years.The Plover stock (basis of $27 million)is currently worth $30 million,but Lark believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Plover distributes $2 million cash to Lark (sufficient E & P exists to cover the distribution).At a later date,Lark sells Plover for $28 million.
a.What are the tax consequences to Lark on the sale?
b.What would be the tax consequences if Plover had not first distributed the $2 million in cash and Lark sold the Plover stock for $30 million?

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The Answer of Lark Corporation is the sole shareholder of Plover Corporation,which it hopes to sell within the next three years.The Plover stock (basis of $27 million)is currently worth $30 million,but Lark believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Plover distributes $2 million cash to Lark (sufficient E & P exists to cover the distribution).At a later date,Lark sells Plover for $28 million.
a.What are the tax consequences to Lark on the sale?
b.What would be the tax consequences if Plover had not first distributed the $2 million in cash and Lark sold the Plover stock for $30 million?

Lark Corporation Is the Sole Shareholder of Plover Corporation,which It