On January 1 of the current year, Broadbent Corporation owned 90 percent of the outstanding stock of Anchorage Corporation. Both companies were domestic corporations. Pursuant to a plan of liquidation adopted by Anchorage in March, Anchorage distributed all of its property in complete redemption of its stock. Anchorage's accumulated earnings and profits were $18,000 on the distribution date. Anchorage has never been insolvent. As part of the liquidation, Anchorage distributed to Broadbent a parcel of land with a basis of $10,000 and a fair market value of $40,000 in redemption of its stock. How much gain must Anchorage recognize on the transfer of this land to Broadbent?

On January 1 of the current year, Broadbent Corporation owned 90 percent of the outstanding stock of Anchorage Corporation. Both companies were domestic corporations. Pursuant to a plan of liquidation adopted by Anchorage in March, Anchorage distributed all of its property in complete redemption of its stock. Anchorage's accumulated earnings and profits were $18,000 on the distribution date. Anchorage has never been insolvent. As part of the liquidation, Anchorage distributed to Broadbent a parcel of land with a basis of $10,000 and a fair market value of $40,000 in redemption of its stock. How much gain must Anchorage recognize on the transfer of this land to Broadbent?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 25P

See similar textbooks

Similar questions

In the current year, Dove Corporation (E & P of $1,000,000) distributes all of its property in a complete liquidation. Alexandra, a shareholder, receives land having a fair market value of $185,000. Dove Corporation had purchased the land as an investment three years ago for $115,000, and the land was distributed subject to a $75,000 liability. Alexandra took the land subject to the $75,000 liability. What is her basis in the land? a. $115,000 b. $185,000 c. $0 d. $110,000
Blue Corp. purchased 100% of the stock of Magenta Corp. in 1984 for $300,000. Early this year, Magenta was liquidated. Blue Corp. received all of Magenta’s assets, which had a basis to Magenta Corp. of $420,000 and a FMV of $440,000. Assume the requirements of §332 were satisfied. What about of gain will Blue Corp. recognize any gain as a result of the liquidation?
On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets included in the purchase agreement are as follows: E (Click the icon to view the other intangible assets.) Read the requirements Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation? Recorded value Tangible assets Data table Intangible assets: Covenant not to compete • Goodwill: $400,000 • Patents (13-year remaining useful life): $70,000 • Customer list $50,000 Goodwill Patents Customer list Total Print Done
Newman Corporation owns 90 shares of SP Corporation. The remaining 10 shares are owned by Kenny (an individual). After several years of operations, Newman decided to liquidate SP Corporation by distributing the assets to Newman and Kenny. The tax basis of Newman's shares is $9,000, and the tax basis of Kenny's shares is $4,000. SP reported the following balance sheet at the date of liquidation: Cash Accounts receivable Stock investment Land Total assets Common stock-Newman (90%) Common stock-Kenny (10%) Total shareholder equity Required: Adjusted tax basis $ 22,000 9,000 8,200 26,000 $ 65,200 FMV $ 22,000 9,000 20,000 149,000 $ 200,000 $ 180,000 20,000 $ 200,000 a. Compute the gain or loss recognized by SP, Newman, and Kenny on a complete liquidation of the corporation, where SP distributes $20,000 of cash to Kenny and the remaining assets to Newman. b. Compute the gain or loss recognized by SP, Newman, and Kenny on a complete liquidation of the corporation, where SP distributes the…
Wolverine Corporation made a distribution of $500,000 to Jim Har Incorporated in partial liquidation of the company on December 31 of this year. Jim Har Incorporated owns 100 shares (100 percent) of Wolverine Corporation. The distribution was in exchange for 50 percent of Jim Har Incorporated’s stock in the company. At the time of the distribution, the shares had a fair market value of $200 per share. Jim Har Incorporated’s tax basis in the shares was $50 per share. Wolverine had total E&P of $8,000,000 at the time of the distribution. a. What are the amount and character (capital gain or dividend) of any income or gain recognized by Jim Har Incorporated as a result of the partial liquidation?
Howard Corporation liquidates and distributes $20,000 cash and land with a fair market value of $80,000 to its sole shareholder, Ryan. Ryan also assumes a $12,000 mortgage that is a attached to the land. Ryan’s basis in the stock is $70,000. Compute the amount of gain or loss that Ryan will recognize on the liquidation.
Pete Corporation has accumulated E & P of $82,000 at the beginning of the year. Its current-year taxable income is $370,000. On December 31, Pete Corporation distributed business property (land: fair market value of $150,000, adjusted basis of $290,000) to Jerry, its sole shareholder. Jerry assumes a $70,000 liability on the property. Included in the determination of Pete Corporation's current taxable income is $16,000 of income recognized from an installment sale in a previous year. In addition, the corporation incurred a Federal income tax liability of $67,200, paid life insurance premiums of $4,500, and received term life insurance proceeds of $150,000 on the death of an officer. a. What is Jerry's gross income from the distribution? b. What is the amount of E & P of Pete Corporation after the distribution of property?