ASC 830: Liquidation Of Foreign Entity

8. Paying any Liability does not count as an Equity Transaction. This does not affect Capital Accounts. Tax Basis is reduced by Partner's share. In this case, 25% of $10,000 payment is a reduction of $2,500 in the Partner's Tax Basis.

When considering bankruptcy, pre-bankruptcy planning is one of the most important steps for Harv and Lois. In a Chapter 7 bankruptcy, the TIB will take all non-exempt valuable property that he can sell to distribute the money to the creditors. The main idea behind the Chapter 7 bankruptcy is ‘liquidation’. However, Harv and

Should the Foreign Sovereign Immunities Act (FSIA) preclude this lawsuit? Why or why not? (P.166)

Exit of investments by way of IPO, sale to a third party (eg trade sale) or wind-up

Equitable chose an equity carve-out method for DLJ. This would allow them to retain at least 50% of the equity of the subsidiary, so it could still consolidate its financial statements as well as file a consolidated tax return. An obvious advantage of this method is the parent company doesn’t lose control over its subsidiary. Another advantage of this method and the spin-off method is

| If all members of a new foreign entity have limited liability, the entity is classified as an association taxed as a corporation.

Too many disposals of small groups of assets that are recurring in nature qualify for discontinued operations under prior GAAP. This caused financial statements to be less decision useful for users. Additionally, the guidance on discontinued operations resulted in higher costs for preparers because it can be complex and difficult to apply. The FASB issued ASU 2014-08 to address those problems by changing the criteria for reporting discontinued operations, while simultaneously enhancing convergence with the International Accounting Standard Board’s reporting requirements for discontinued operations.

Section 351(c)(2) allows shareholders to dispose of all or part of the transfers stock without preventing the corporations Section 351 transaction from satisfying the “ control immediate after” requirement (4). Section 351(d) states that there are times when services, certain indebtedness, and accrued interest not treated as property as per James v. Commissioner, 53 T.C. 63 (1969); cf. Hospital Corporation of America v. Commissioner, 81 T.C. 520

b. A parent transfers the net assets of a wholly owned subsidiary into the parent and liquidates the subsidiary. That transaction is a change in legal organization but not a change in the reporting entity.

Section 368(a)(1) of the tax code provides several options for corporate reorganizations. Section 368(a)(1)(d), also known as a “divisive D reorganization”, is the best choice for this particular situation. In a divisive “D” reorganization, the controlling corporation (in this case, BackBone) will distribute assets (the Willow office) to a newly formed subsidiary corporation, in exchange for the stock of the new subsidiary corporation, in a transaction that qualifies under section 355 (Sec. 368(a)(1)(d)). After the transaction is complete, the Willow office will be its own corporation which is wholly (or at least mostly) owned by BackBone. BackBone will also still own and control the Troy, Union and Vista offices after the reorganization.

“The total equity investment (equity investments in a legal entity are interests that are required to be reported as equity in that entity’s financial statements) at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders.”

* The ownership of the partners is dissolved and they become mere employees who are responsible to the shareholders and Board of Directors

“The Division of Foreign Assets Control was established in the Office of International Finance by a Treasury Department order in 1950, after People 's Republic of China entered the Korean War. On October 15, 1962, through a Treasury Department order, the Division of Foreign Assets Control became the Office of Foreign Assets Control (OFAC). ”

Since Tout Suite will be a 100% owner of the foreign entity, it will be considered a “controlled foreign corporation” (CFC). As such, it will be subject to Subpart F rules, which would require Tout Suite to recognize some of its income each tax year as foreign base company income, regardless

vii) Furthermore, the capital allocation process also changed following the majority shareholding in foreign subsidiaries. Before the consolidation, the decision process for capital allocation was done primarily by the local managers of the foreign affiliate, who would then go out and raise the capital on their own.