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Fir Corporation distributes all of its property in a complete liquidation. Debbie, a shareholder, receives $8,000...

Fir Corporation distributes all of its property in a complete liquidation. Debbie, a shareholder, receives $8,000 cash and securities having a fair market value of $32,000. The securities had been acquired three years ago by Fir as an investment for $24,000. Debbie has a $38,000 basis in her Fir stock. What is Debbie's basis in the securities received in the liquidation of Fir?

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Answer #1

Given :-
Value Of Assets Received by Debbie instead of Shares
Cash $8000
Investment $32000 {market value}
Fir Limited Alloted the shares on the basis of pro rata basis
Where the shareholders get Assets based on there amount of Shares held by shareholders
Since Debbie received Total value of assests worth of 40000
The actual shares held by Debbie is
Worth 24000 investment value of cash 3years ago can be calculated by cost of index
That is 8000*254/272 =7500
Total value of Shares held is
24000+7500 = 31500
Therefore the Debbie held shares worth $31500 and he got a compensation of $40000 from Fir Limited

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