Last year Mustang Corporation acquired land in a Section 351 tax-free exchange. On the date of transfer, the land had a basis $360,000 and a FMV of $500,000.Mustang Corp. has two shareholders, Skylar and Mandy unrelated individuals. Skylar owns 80% of the stock in Mustang and Mandy owns 20%. The corporation adopts a plan of liquidation in the current year. On this date the value of the land has decreased to $250,000. What is the effect of each of the following on Mustang Corporation? A. Distribute all the land to Skylar. B. Distribute all the land to Mandy. C. Distribute 50% of the land to Skylar and 50% to Mandy.

Last year Mustang Corporation acquired land in a Section 351 tax-free exchange. On the date of transfer, the land had a basis $360,000 and a FMV of $500,000.Mustang Corp. has two shareholders, Skylar and Mandy unrelated individuals. Skylar owns 80% of the stock in Mustang and Mandy owns 20%. The corporation adopts a plan of liquidation in the current year. On this date the value of the land has decreased to $250,000. What is the effect of each of the following on Mustang Corporation? A. Distribute all the land to Skylar. B. Distribute all the land to Mandy. C. Distribute 50% of the land to Skylar and 50% to Mandy.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Barry sold depreciable property used in his business to Ken for $192,000 cash plus a bond redeemable in 5 years for $95,000, but currently trading on the NYSE for $98,000. The property cost Barry $310,000 plus $45,000 in capital improvements and had actual accumulated depreciation at the time of the sale of $225,000. The amount of accumulated depreciation he should have taken was $205,000. Determine the amount of gain or loss recognized. Explain your conclusions including the various components of how you determined your answer. Q.2 During 2019, Anna had the following transactions: Salary $90,000 Interest income on IBM bonds 3,000 Damages for physical personal injury (car accident) 115,000 Punitive damages (same car accident) 150,000 Stock dividends from Chevron Corp Stock with option to receive cash of $15,000 or stock valued at $22,000 (Anna opted to that the stock) Q.3 Joseph exchanged farmhouse that he used in his farming business for a building used by Sandy in her…
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?
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?
[The following information applies to the questions displayed below.] Maple Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Jian, who immediately elected S corporation status. On December 31 of the current year, Maple distributed $40,500 cash to Jian. What are the amount and character of gain Jian must recognize on the distribution in each of the following alternative scenarios? Note: Leave no answer blank. Enter zero if applicable. If the answer is "0", select "None". Problem 22-66 Part a (Algo) a. At the time of the distribution, Jian's basis in his Maple Corporation stock was $47,600. Ees Amount Gain b. At the time of the distribution, Jian's basis in his Maple Corporation stock was $13,250. Character Amount Character
Volunteer Corporation reported taxable income of $450,000 from operations this year. The company paid federal income taxes of $94,500 on this taxable income. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land's fair market value was $81,000 and its tax and E&P basis to Volunteer was $65,500. Rocky assumed a mortgage attached to the land of $16,200. The company had accumulated E&P of $864,000 at the beginning of the year. a. Compute Volunteer's taxable income and federal income tax. Taxable income Federal income tax
Uramilaben
Hah
Queen owns 100% of Royal Corporation. Royal Corporation was originally formed as a C corporation but has since elected to be treated as an S corporation. At the end of 2020, before considering any distributions, Royal Corporation's accumulated adjustments account (AAA) balance was $55,000 and its accumulated earnings and profits from its years as a C corporation was $20,000. On December 31, Royal Corporation distributed $80,000 to Queen. What is the amount and character of income Queen must recognize on the distribution if her stock basis before considering the distribution was $100,000? What is Queen's stock basis after accounting for the distribution?
Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Adjusted Tax FMV Basis $ 56,000 420,000 644,000 $ 1,120,000 $ 28,000 280,000 840,000 Inventory Building Land $ 1,148,000 Total The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $1,020,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains…
The stock of Quail Corporation is held as follows: 85% by Pheasant Corpo- ration and 15% by Gisela, an individual. Quail Corporation is liquidated in December of the current year pursuant to a plan adopted earlier in the year. At the time of its liquidation, Quail Corporation has assets with a basis of $730,000 and fair market value of $1,000,000. Quail Corporation distributes the property pro rata to Pheasant Corporation and to Gisela. Compute Quail’s recognized gain or loss on the distribution of property to Pheasant. Compute Quail’s recognized gain or loss on the distribution of property to Gisela.
Fill in The Blanks. (See attached Image).
Global Corporation distributed property with an $543,000 fair market value and a $298,650 adjusted basis to one of its shareholders. The property was subject to a $164,258 mortgage, which the shareholder assumed. Global has ample E & P to cover any distribution made during the year. What is the amount of the shareholder's dividend income on the distribution? 378,742 What is the shareholder's basis in the property received?