Question

Company Y is liquidating. It has two shareholders, Amanda and Heather. Amanda owns 60 shares (with...

Company Y is liquidating. It has two shareholders, Amanda and Heather. Amanda owns 60 shares (with a $6,000 a/b) and Heather owns 40 shares (with a $3,000 a/b). Company Y will distribute each of its assets pro rata to its shareholders.

                                                      A/B                 FMV

         Cash                                     2,000               2,000

         Building                               8,000               6,000

         Goodwill                              1,000               2,000

         Gain/Loss to Company Y: ________________________________________

         Gain/Loss to A: ______________________________________________

         Gain/Loss to H: ______________________________________________

         Adjusted basis Amanda will have in her share of the building: ________________

Business   Accounting   
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Answer #1

It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due. As company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims.

Gain/Loss to Company Y

Cash(2000-2000) 0
Building(8000-6000) -2000
Goodwill(1000-2000) 1000
Loss -2000

Gain Loss to A

Cash 1200
Building 3600
Goodwill 1200
Investment 6000
Net 0

Gain Loss to H

Cash 800
Building 2400
Goodwill 800
Investment 3000
Net gain 1000

Adjusted basis Amada will have in share of building

FMV of Building 6000
Amada will have in the share of building 3600
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