Question

4.         What are the tax consequence to the corporation of the following alternative liquidating distributions?

            Lynch, Inc. distributes its assets to George and D as tenants in common, George taking an undivided 4/5ths in each parcel of real estate (Green Acre) (and $160,000 in cash) and D taking an undivided 1/5th in each parcel of land (and $40,000 in cash). Green Acre was acquired four years ago, when its fair market value and basis were both $500,000, as a contribution by George in a § 351 transaction in exchange for enough stock to increase his stock ownership from 40% to 80%.

Determine the tax consequences to all parties.

Answer 1