Question - At the time of its liquidation, Bluejay Corporation had the following assets and liabilities:

Basis to Fair

Bluejay Corporation Market Value

Cash $240,000 $240,000

Inventory 180,000 480,000

Unimproved land 300,000 600,000

Notes payable (60,000) (60,000)

Mortgage on land (180,000) (180,000)

Redbird Corporation, the sole shareholder of Bluejay Corporation, purchased the Bluejay stock as an investment eight years ago for $620,000. At the time of its liquidation, Bluejay had E & P of $400,000, a net operating loss carryover of $100,000, and a general business credit carryover of $5,000.

a. What are the tax consequences to Bluejay and to Redbird as a result of Bluejay's liquidation?

b. What basis will Redbird have in Bluejay's assets?

c. What happens to Bluejay's E & P, net operating loss carryover, and general business credit carryover?