The stock of Mulberry Corporation is owned by Archana (60%) and Anar (40%), who are mother and daughter. Pursuant to a plan of complete liquidation adopted earlier in the current year, Mulberry distributes land worth $575,000 to Anar (Basis of $100,000 in Mulberry stock). The land was purchased by Mulberry Corporation three years ago for $650,000, and it is distributed subject to a liabilit of $435,00O. What amount of gain or loss is recognized by Mulberry Corporation and by Anar with respect to the distribution of the land?

The stock of Mulberry Corporation is owned by Archana (60%) and Anar (40%), who are mother and daughter. Pursuant to a plan of complete liquidation adopted earlier in the current year, Mulberry distributes land worth $575,000 to Anar (Basis of $100,000 in Mulberry stock). The land was purchased by Mulberry Corporation three years ago for $650,000, and it is distributed subject to a liabilit of $435,00O. What amount of gain or loss is recognized by Mulberry Corporation and by Anar with respect to the distribution of the land?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 25P

See similar textbooks

Similar questions

In the current year, John, Tara, and Sean form Corporation. John contributes land (a capital asset) having a $120,000 FMV purchased as an investment four years ago for $10,000 in exchange for 120 shares of Ash stock. Tara contributes machinery (Sec. 1231 property) purchased four years ago and used in her business in exchange for 120 shares of Ash stock. Immediately before the exchange, the machinery had a $130,000 adjusted basis and a 120,000 FMV. Sean contributes services worth $70,000 in exchange for 70 shares of Ash stock. a.What is the amount of John's recognized gain or loss? b.What is John's basis in his Ash shares? When does his holding period begin? c.What is the amount of Tara's recognized gain or loss? d.What is Tara's basis in her Ash shares? When does her holding period begin? e.How much income, if any, does Sean recognize? f.What is Sean's basis in his Ash shares? When does his holding period begin? g.What is Ash's basis in the land and the machinery? When…
The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transferred property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property? Oa. $160,000 Ob. $0 Oc. $20,000 Od. $180,000
Moustapha and Ava have owned X Corp as equal shareholders for the last five years. Due to unexpected growth, X Corp needs an additional storage facility. In the current year, Moustapha contributes a parcel of land to X Corp that will be used to build this facility. Moustapha purchased the land 10 years ago for $10,000 and has held it as an investment. The land has a fair market value at the time of contribution of $100,000. Moustapha will receive additional stock in exchange for the land so that after the land contribution he will own 70% of the stock of X Corp. What are the tax consequences to Moustapha and Ava of the contribution of land? O Moustapha recognizes $90.000 of capital gain and Ava recognizes no gain O The entire $100,000 fair market value of the land is ordinary income to Moustapha: Ava has no income O Moustapha must recognize half of the $90,000 of realized gain and Ava recognizes the other half O Neither Moustapha nor Ava has any tax conscquences upon the land…
Bridget transferred a piece of land she held personally to her wholly owned corporation using the provisions of ITA 85. The land had an adjusted cost base of $150,000 and a fair market value of $250,000 at the time of transfer. The property was mortgaged for $50,000. As consideration for the transfer, Bridget received cash of $200,000 and preferred shares with a legal stated capital of $10,000. The corporation assumed the mortgage. Which one of the following is the elected transfer price (first) and the adjusted cost base of the preferred shares (second)? a. $150,000 and Nil b. $250,000 and $240,000 c. $250,000 and Nil d. $260,000 and $50,000 Clear my choice
In the current year, Tom , Jay , and Dana form Ares Corporation. Tom contributes land (a capital asset) having a $62,500 FMV (fair market value) in exchange for 165 shares of stock. He purchased the land three years ago for $65,000. Jay contributes machinery (Sec. 1231 property purchased four years ago) having a $115,000 adjusted basis and a $37,500 FMV in exchange for 105 shares of Ares stock. Dana contributes services worth $25,000 in exchange for 60 shares of Ares stock.
In the current year, Dan, Jay, and Erin form Zeus Corporation. Dan contributes land (a capital asset) having a $75,000 FMV (fair market value) in exchange for 85 shares of Zeus stock. He purchased the land three years ago for $100,000. Jay contributes machinery (Sec. 1231 property purchased four years ago) having a $115,000 adjusted basis and a $45,000 FMV in exchange for 75 shares of Zeus stock. Erin contributes services worth $30,000 in exchange for 10 shares of Zeus stock. A. What is the amount of Dan's recognized gain or loss? b.What is Dan's basis in his Zeus shares? When does his holding period begin? c.What is the amount of Jay's recognized gain or loss? d. What is Jay's basis in his Zeus shares? When does his holding period begin? e.How much income, if any, does Erin recognize? f.What is Erin's basis in her Zeus shares? When does her holding period begin? g. What is Zeus's basis in the land and the machinery? When does its holding period begin? How…
I will thumbs up for a timely response and the correct answer. Boston corporation acquired two years in a section 351 transfer which used its business. The property had FMV of $450,000 and basis of $600,000 at contribution. The shareholder elected to claim the basis adjustment. In liquidation Boston distributes the land to its 30% shareholder Nancy. The other shareholders are unrelated. At distribution the land has FMV of $400,000. What is the gain or loss recognized by Boston on the distribution?
Vogel, Inc., an S corporation for five years, distributes a tract of land held as an investment to Jamari, its majority shareholder. The land was purchased for $275,800 ten years ago and is currently worth $689,500. If an amount is zero, enter, "0". a. As a result of the distribution, what is Vogel's recognized capital gain? How much is reported as a distribution to shareholders? Vogel recognizes a capital gain ✔ of $ which is reported on Schedule K, and a proportionate share of it passes through to the shareholders ✔. Jamari would take a $ b. What is the net effect of the distribution on Vogel's AAA? basis in the land. There is a net decrease of $ on Vogel's AAA. c. Assume instead that the land had been purchased for $689,500 and was currently worth $275,800. How much would Vogel recognize as a loss? What would be the net effect on Vogel's AAA? What would be Jamari's basis in the land? Vogel recognizes a loss $ 0and the net effect on Vogel's AAA is a decrease ✓ of $ take a basis in…
In the current year, Dove Corporation (E & P of $1,000,000) distributes all of its property in a complete liquidation. Alexandra, a shareholder, receives land having a fair market value of $185,000. Dove Corporation had purchased the land as an investment three years ago for $115,000, and the land was distributed subject to a $75,000 liability. Alexandra took the land subject to the $75,000 liability. What is her basis in the land? a. $115,000 b. $185,000 c. $0 d. $110,000
During the current year, TLI Corporation sells a tract of land for $90,000. The sale is made to Sophie, TLI Corporation's sole shareholder. TLI Corporation originally purchased the land five years earlier for $121,000. Read the requirements. Requirement a. What is the amount of gain or loss that TLI Corporation will recognize on the sale during the current year? First, calculate the gain or loss realized and then calculate the gain or loss recognized in the current year. (For a gain or loss with a zero value, enter $0 and select N/A.) Amount Gain or loss Gain or loss realized Gain or loss recognized Requirements a. What is the amount of gain or loss that TLI Corporation will recognize on the sale during the current year? b. Assume that in the following year, Sophie sells the land for $111,000. What is the amount of gain or loss Sophie will recognize? What are the tax consequences to TLI Corporation upon the subsequent sale by Sophie? c. Assume that in the following year, Sophie sells…
In March of Year 2, Mason contributed the following two properties, which he acquired in February of Year 1, to Boston Corporation in exchange for additional Boston stock: (1) land having a $45,000 FMV and a $78,000 basis and (2) another property having an $81,000 FMV and a $77,000 adjusted basis. Boston' employees use the land as a parking lot until Boston sells it in March of Year 3 for $43,000. One month after the sale, in April of Year 3, Boston adopts a plan of liquidation. (Assume that the properties were contributed to Boston in a Sec. 351 transaction. Assume that the second property contributed by Mason was not land.) Read the requirements. (Enter all amounts, even losses, as a positive number.) Requirement c. How would your answer to Part b change if the land were not used in Boston' trade or business? If the land were not used in Boston' trade of business, Boston recognizes a gain/loss on the subsequent sale of land.
In 2021, Ruth transfers the following property for an 80% interest in RGB corporation (1,000 shares): Land with a FMV of $100,000 and an adjusted basis of $20,000. The land had a $40,000 mortgage which was assumed by the corporation. What basis does RBG Corp have in the land?