Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). Afterliquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balancesheet:AdjustedТаx Basis$ 165,00016,50066,000FMVAppreciation$ 165,00033,000CashBuilding16,50066,000$ 82,500Land132,000$ 330,000$ 247,500TotalUnder the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI.Shauna's tax basis in her WFI stock is $41,250. Danielle will receive the building and land in exchange for her 50 percentinterest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cashavailable to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as aresult of the liquidation. (Negative amounts should be indicated by a minus sign.)b. What amount of gain or loss does Shauna recognize in the complete liquidation?Gain or loss recognized

Gain on sale of interest in a corporation = Consideration received - Tax basis in WFI stock.

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: Adjusted Tax Basis $ 165,000 16,500 FMV Appreciation Cash $ 165,000 Building 33,000 132,000 16,500 66,000 Land 66,000 $ 330,000 $ 247,500 $ 82,500 Total Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFl stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) b. What amount of gain or loss does Shauna recognize in the complete liquidation? Gain or loss recognized

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: Adjusted Tax Basis $ 165,000 16,500 FMV Appreciation Cash $ 165,000 Building 33,000 132,000 16,500 66,000 Land 66,000 $ 330,000 $ 247,500 $ 82,500 Total Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFl stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) b. What amount of gain or loss does Shauna recognize in the complete liquidation? Gain or loss recognized

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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