Violet Corporation is the sole shareholder of Finch Corporation,which it hopes to sell within the next three years.The Finch stock (basis of $28 million)is currently worth $33 million,but Violet believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Finch distributes $3 million cash to Violet (sufficient E & P exists to cover the distribution).At a later date,Violet sells Finch for $30 million.

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The Answer of Violet Corporation is the sole shareholder of Finch Corporation,which it hopes to sell within the next three years.The Finch stock (basis of $28 million)is currently worth $33 million,but Violet believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Finch distributes $3 million cash to Violet (sufficient E & P exists to cover the distribution).At a later date,Violet sells Finch for $30 million.

Violet Corporation Is the Sole Shareholder of Finch Corporation,which It