Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Cash Building Land Total FMV $ 200,000 50,000 150,000 $ 400,000 Adjusted Tax Basis $ 200,000 10,000 200,000 $ 410,000 Appreciation. (Depreciation) 40,000 (50,000) $ (10,000) Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $100,000. 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. Moto blogative am
Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Cash Building Land Total FMV $ 200,000 50,000 150,000 $ 400,000 Adjusted Tax Basis $ 200,000 10,000 200,000 $ 410,000 Appreciation. (Depreciation) 40,000 (50,000) $ (10,000) Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $100,000. 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. Moto blogative am
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![8
D
es
Required information
[The following information applies to the questions displayed below.]
Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its
remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet:
Cash
Building
Land
Total
FMV
Adjusted
Tax Basis
$ 200,000
$ 200,000
50,000
150,000
10,000
200,000
$ 400,000 $ 410,000
Appreciation
(Depreciation)
Gain or loss recognized
40,000
(50,000)
$ (10,000)
Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF.
Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent
interest in ROF. His tax basis in the ROF stock is $100,000. 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.
Note: Negative amounts should be indicated by a minus sign.
f. What amount of gain or loss does Tiffany recognize in the complete liquidation?
Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $160,000 in the liquidation and
Carlos will receive the land and building plus $40,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc6a7273-7680-466f-89c6-36324702eea4%2Fd158f28c-61bb-46d7-bcee-cccea0009425%2Fm591qmq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8
D
es
Required information
[The following information applies to the questions displayed below.]
Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its
remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet:
Cash
Building
Land
Total
FMV
Adjusted
Tax Basis
$ 200,000
$ 200,000
50,000
150,000
10,000
200,000
$ 400,000 $ 410,000
Appreciation
(Depreciation)
Gain or loss recognized
40,000
(50,000)
$ (10,000)
Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF.
Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent
interest in ROF. His tax basis in the ROF stock is $100,000. 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.
Note: Negative amounts should be indicated by a minus sign.
f. What amount of gain or loss does Tiffany recognize in the complete liquidation?
Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $160,000 in the liquidation and
Carlos will receive the land and building plus $40,000.
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