Exercise 20-18 (Algorithmic) (LO. 1) On January 7, 2022, 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: Property 1 Property 2 Net built-in loss Shareholder's Fair Market Built in Gain Basis Value or (Loss) $439,440 $476,060 $366,200 $622,540 $73,240 ($146,480) ($73,240) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 20% shareholder when the property is worth $402,820. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. 125,000 Martin's basis is Property 1 is a carryover Martin's basis in Property 2 is a stepped-down ✔basis of $ ✔basis of $ 3,233,223 X. x. b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. 2,324,232 X. 23,324 X and a recognized loss of $ Martin has a realized loss of $
Exercise 20-18 (Algorithmic) (LO. 1) On January 7, 2022, 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: Property 1 Property 2 Net built-in loss Shareholder's Fair Market Built in Gain Basis Value or (Loss) $439,440 $476,060 $366,200 $622,540 $73,240 ($146,480) ($73,240) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 20% shareholder when the property is worth $402,820. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. 125,000 Martin's basis is Property 1 is a carryover Martin's basis in Property 2 is a stepped-down ✔basis of $ ✔basis of $ 3,233,223 X. x. b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. 2,324,232 X. 23,324 X and a recognized loss of $ Martin has a realized loss of $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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
Transcribed Image Text:Exercise 20-18 (Algorithmic) (LO. 1)
On January 7, 2022, 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:
Property 1
Property 2
Net built-in loss
Shareholder's Fair Market Built in Gain
Basis
Value
or (Loss)
$439,440
$476,060
$366,200
$622,540
$73,240
($146,480)
($73,240)
Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 20% shareholder when the property is worth
$402,820.
a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022.
125,000
x.
Martin's basis is Property 1 is a carryover
Martin's basis in Property 2 is a stepped-down
✔ basis of $
✔basis of $ 3,233,223 X.
b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2.
2,324,232
X.
23,324 X and a recognized loss of $
Martin has a realized loss of $
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