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.
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.
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 PropertiesProperty 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)
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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.
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Compute Martin’s basis in Property 1 and in Property 2 as of January 7, 2021.
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Compute Martin’s realized and recognized loss on the liquidating distribution of Property 2.
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