6.The stock in Black Corporation is owned by Joseph and Elizabeth, who are unrelated. Joseph owns 80%and Elizabeth owns 20% of the stock in Black Corporation. The following assets are to be distributed incomplete liquidation of Black Corporation:CashInventoryEquipmentAdjustedBasisFair MarketValue$300,000$300,00075,000100,000200,000100,000a.What gain or loss would Black Corporation recognize if it distributes the cash and equipmentto Joseph and the inventory to Elizabeth?b. What gain or loss would Black Corporation recognize if it distributes the cash and inventory toJoseph and the equipment to Elizabeth?

The objective of the question is to calculate the gain or loss that Black Corporation would…

Answered: 6. The stock in Black Corporation is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 7, 2021, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder’s basis, the fair market value, and the built-in gain (loss) of each property are: Martin Corporation Properties Property Shareholder's Basis Fair Market Value Built-in Gain (Loss) Property 1 $300,000 $375,000 $75,000 Property 2 $525,000 $400,000 ($125,000) Net Built-In Loss: ($50,000) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 30% shareholder when the property is worth $350,000. Compute Martin’s basis in Property 1 and in Property 2 as of January 7, 2021. Compute Martin’s realized and recognized loss on the liquidating distribution of Property 2.
4 Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packard received land with a fair market value of $445,000. Packard's basis in the State stock was $677,500. The land had a basis to State Company of $625,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives? Multiple Choice $180,000 loss recognized by State and a basis in the land of $445,000 to Packard. $180,000 loss recognized by State and a basis in the land of $625,000 to Packard. No loss recognized by State and a basis in the land of $445,000 to Packard. No loss recognized by State and a basis in the land of $625,000 to Packard.
Charla Corporation is owned eighty percent (80%) by Jeanette and twenty percent (20%) by Victoria who are unrelated to each other. At the time of a Complete Liquidation, Charla Corporation owned Land that had a Fair Market Value of $100,000 and a basis to Charla Corporation of $400,000. The Land was acquired by Charla Corporation in a Section 351 Transfer two (2) years ago from Victoria when its Fair Market Value was $200,000. (Assume that there was no business purpose for the transfer). Pursuant to the Complete Liquidation, the Land is sold to an unrelated third party for $100,000 and the $100,000 proceeds of the sale are distributed proportionately (pro-rata) to Jeanette and Victoria (ie. eighty percent (80%) to Jeanette and twenty percent (20%) to Victoria). The Recognized Loss to Charla Corporation is: A. $500.00 B. $300.00 C $200.00 D. SO
Sub Corporation is a wholly owned subsidiary of Parent Corporation. Sub Corp has three assets: Cash $20,000; Inventory FMV $200,000, AB $140,000; Land FMV $180,000, AB $210,000. Sub adopts a formal plan of liquidation and immediately thereafter distributes its assets to Parent. Parent's adjusted basis in its Sub Corporation stock was equal to $285,000. Parent had acquired Sub Corporation six years prior to the liquidation. What are the tax consequences of this liquidation to Parent Corp and Sub Corp? Sub Corporation is owned 95% by Parent Corporation and 5% by Brian an unrelated person. Sub Corp has three assets: Equipment FMV $20,000, AB $6,000; Inventory FMV $200,000, AB $140,000; Land FMV $180,000, AB $210,000. Sub adopts a formal plan of liquidation and immediately thereafter distributes its assets to Parent. Parent's adjusted basis in its Sub Corporation stock was equal to $285,000 and Brian's adjusted basis in his Sub stock was equal to $13,500. Parent Corp and Brian had acquired…
The stock in Ivory Corporation is owned by Gold Corporation (80%) and Imelda (20%). Gold Corporation purchased its shares in Ivory nine years ago at a cost of $650,000, and Imelda purchased her shares in Ivory four years ago at a cost of $175,000. Ivory Corporation has the following assets that are distributed in complete liquidation: Adjusted Basis Fair Market ValueCash $600,000 $600,000Inventory 80,000 200,000Equipment 350,000 200,000a. Assume that Ivory Corporation distributes the cash and inventory to Gold Corporation and the equipment to Imelda. What are the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda?b. Assume that Ivory Corporation distributes the cash and equipment to Gold Corporation and the inventory to Imelda. What are the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda?
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For which of the corporate distributions listed below may loss be recognized? Question options: A dividend of property with a basis of $500,000 and a value of $450,000 Securities with a value of $500,000 and a basis of $550,000 distributed to its shareholders pro-rata as part of a complete liquidation; the securities were bought by the corporation three years ago with internal funds. Land with a value of $400,000 and a basis of $470,000 distributed to a 70% shareholder pursuant to a complete liquidation; the land was contributed by the same shareholder 20 months before the liquidation
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: Adjusted FMV Таx Basis Appreciation $ 165,000 33,000 $ 165,000 16,500 Cash Building 16,500 132,000 66,000 $ 247,500 Land 66,000 $ 330,000 $ 82,500 Total Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFI stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) c. What amount of gain or loss does…
1.Fred Corporation is a 90% owned subsidiary of John Corporation acquired several years ago at book value (which is equal to fair value). For the years 2020 and 2021, John and Fred report the following: John's separate income Fred's net income 2020. 2021 P300,000 P400,000 80,000 60,000 The only intercompany transaction between John and Fred during 2020 and 2021 was the January 8, 2020 sale of land. The land had a book value of P20,000 and was sold intercompany for P30,000, its appraised value at the time of sale. a. The Consolidated net income for 2020 and 2021: 2020 2021 a.P372,000 P460,000 b.P370,000 P460,000 c.P362,000 P454,000 d.P380,000 P460,000
Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $617,500. The corporation's basis in the Tea Company stock was $407,500. The land had a basis to Tea Company of $682,500. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives? Multiple Choice $210,000 gain recognized and a basis in the land of $682,500. $210,000 gain recognized and a basis in the land of $617,500. No gain recognized and a basis in the land of $682,500. No gain recognized and a basis in the land of $275,00.

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