Example Creating an Interactive Flowchart Slide 1 This

Example Creating an Interactive Flowchart Slide 1 This file contains an example of how animation “Triggers, ” Action Buttons/Hyperlinks and “Custom Shows” can be used to direct the flow of animation. Please view this presentation in “Slide. Show” mode. Use left mouse click or “Enter” to forward animation sequences. ----This particular flowchart is an excerpt from the flowchart presented in “WACRA 2005 – Distribution Flowchart (La. Rue), ” which addresses the U. S. tax consequences (under Sections 311, 336, 337, and 361 of the Internal Revenue Code) that result to a corporation when it distributes noncash property to its shareholders in a variety of contexts (dividend distribution, liquidating distribution, distribution in connection with a reorganization, etc. ) © 2005, David W. La. Rue, Ph. D. , All rights reserved

Distribution of Noncash Assets: Tax Consequences to Corporation Statutory Framework Slide 2 Start Here Was the distribution made in connection with the complete liquidation of a corporation? Yes? No? Try it! Hit Control+A to get the cursor, then click on No For each noncash asset so distributed, iterate through the following sequence: Yes? Is the FMV of the asset greater than its adjusted basis as of the date of the distribution? Yes? No? or Yes No? . The distributing corporation must recognize the gain built into the value of the distributed asset. No The loss built into the value of the distributed asset is permanently disallowed. Next Asset © 2005, David W. La. Rue, Ph. D. , All rights reserved

Distribution of Noncash Assets: Tax Consequences to Corporation Statutory Framework Slide 3 The loss built into the value of the distributed asset is permanently disallowed. Start Here Next Asset No Was the distribution made in connection with the complete liquidation of a corporation? No Go Back? Yes Is the distribution made pursuant to the liquidation of an 80% controlled subsidiary under Section 332? Yes? No? Test for § 332? Is the FMV of the asset greater than its adjusted basis as of the date of the distribution? No? Yes The distributing corporation must recognize the gain built into the value of the distributed asset. No Yes For each noncash asset so distributed, iterate through the following sequence: Is the property distributed to the parent corporation? Yes? No? Yes No gain or loss is recognized by the distributing corporation. Next Asset © 2005, David W. La. Rue, Ph. D. , All rights reserved

Distribution of Noncash Assets: Tax Consequences to Corporation Statutory Framework Slide 4 Start Here Was the distribution made in connection with the complete liquidation of a corporation? The loss built into the value of the distributed asset is permanently disallowed. No Go Back? Is the distribution made pursuant to the liquidation of an 80% controlled subsidiary under Section 332? No Is the FMV of the asset greater than its adjusted basis as of the date of the distribution? Yes Go Back? Yes? No? Yes No? The distributing corporation must recognize the gain built into the value of the distributed asset. Next Asset No Is the distribution made by a target corporation in connection with a nontaxable reorganization? Next Asset No Yes For each noncash asset so distributed, iterate through the following sequence: Is the distributed asset an asset which was received by the target corporation from the acquiring corporation in connection with the reorganization? Yes? No? Yes No gain or loss is recognized by the distributing corporation. © 2005, David W. La. Rue, Ph. D. , All rights reserved

Distribution of Noncash Assets: Tax Consequences to Corporation Statutory Framework Slide 5 Start Here Was the distribution made in connection with the complete liquidation of a corporation? No Go Back? Yes Is the distribution made pursuant to the liquidation of an 80% controlled subsidiary under Section 332? Yes Go Back? No Is the distribution made by a target corporation in connection with a nontaxable reorganization? Yes Go Back? © 2005, David W. La. Rue, Ph. D. , All rights reserved

Distribution of Noncash Assets: Tax Consequences to Corporation Statutory Framework Slide 6 Continue Is the distribution made by a target corporation in connection with a nontaxable reorganization? No Go Back? Next Asset Yes For each noncash asset so distributed, iterate through the following sequence: Is the FMV of the asset greater than its adjusted basis as of the date of the distribution? Yes? No? Yes The distributing corporation must recognize the gain built into the value of the distributed asset. No The remaining sequence covers the distribution of a built-in loss asset in a complete liquidation under § 336. NOT INCLUDED IN THIS DEMONSTRATION FILE. © 2005, David W. La. Rue, Ph. D. , All rights reserved