Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, RedBlossom 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 TeaCompany 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 $275,000.

Given Fair market value of land = $617,500 Basis in tea company stock = $407,500 Land has basis to…

Answered: Red Blossom Corporation transferred its…

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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In a qualified 351 transaction, Clara transfer the following assets to Columbia corporation in exchange for 100 % of its stock: transfer property adjusted basis fair market value building 100,000 90,000 land 300,000 800,000 equipment 150,000 100,000 What are Columbia basis in the land, building, and equipment?
Snowy Ltd acquires Pax Ltd on 1 July 2018 for $5,000,000 being the fair value of the considerationtransferred. At that date, Pax Ltd’s net identifiable assets have a fair value of $4,400,000. Goodwill of$600,000 is therefore the difference between the aggregate of the consideration transferred and thenet identifiable assets acquired.The fair value of the net identifiable assets of Pax Limited are determined as follows:($000)Patent rights 200Machinery 1,000Buildings 1,500Land 2,3005,000Less: Bank loan 600Net assets 4,400At the end of the reporting period of 30 June 2019, the management of Snowy Ltd determines thatthe recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals$4,500,000. The carrying amount of the net identifiable assets of Pax Ltd, excluding goodwill, isunchanged and remains at $4,400,000.Required:a) Prepare the journal entry to account for any impairment of goodwill. ) Assume instead that at the end of the reporting period the management…
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Russell Corporation sold a parcel of land valued at $400,000. Its basis in the land was $275,000. For the land, Russell received $50,000 in cash in yar 0 and a note providing that Russell will receive $175,000 in year 1 and $175,000 in yar 2 from the buyer. What is Russell’s realized gain on the transaction? What is Russell’s realized gain in year 0, year 1, and year 2?
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