During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $100,000, a fair market value of $800,000, and is subject to a liability of $900,000. Kena, who takes the land subject to the liability, has a basis of $200,000 in the Ecru stock. What are the income tax Consequences to Kena and Ecru Corporation with respect to the liquidating distribution of the land?
During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $100,000, a fair market value of $800,000, and is subject to a liability of $900,000. Kena, who takes the land subject to the liability, has a basis of $200,000 in the Ecru stock. What are the income tax Consequences to Kena and Ecru Corporation with respect to the liquidating distribution of the land?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $100,000, a fair market value of $800,000, and is subject to a liability of $900,000. Kena, who takes the land subject to the liability, has a basis of $200,000 in the Ecru stock. What are the income tax Consequences to Kena and Ecru Corporation with respect to the liquidating distribution of the land?
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