Question

Kevin and Bob have owned and operated SOA as a C corporation for a number of...

Kevin and Bob have owned and operated SOA as a C corporation for a number of years. When they formed the entity, Kevin and Bob each contributed $100,000 to SOA. They each have a current basis of $100,000 in their SOA ownership interest. Information on SOA’s assets at the end of year 5 is as follows (SOA does not have any liabilities):

Assets FMV Adjusted Basis Built-in Gain
Cash $ 200,000 $ 200,000 $ 0
Inventory 80,000 40,000 40,000
Land and building 220,000 170,000 50,000
Total $ 500,000

At the end of year 5, SOA liquidated and distributed half of the land, half of the inventory, and half of the cash remaining after paying taxes (if any) to each owner. Assume that, excluding the effects of the liquidating distribution, SOA's taxable income for year 5 is $0.

b. What is the amount and character of gain or loss Kevin will recognize when he receives the liquidating distribution of cash and property? Recall that his stock basis is $100,000 and he is treated as having sold his stock for the liquidation proceeds.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Kevin and Mary are 50/50 partners in ABC partnership with each having an outside basis in...
Kevin and Mary are 50/50 partners in ABC partnership with each having an outside basis in their partnership interest of $160,000. The partnership distributes cash of $80,000 to Kevin and Inventory with a basis of $40,000 and a FMV of $80,000 to Mary. Do Kevin or Mary have any gain or loss on the distributions? What basis does each take in the assets received?
Kevin and Mary are 50/50 partners in ABC partnership with each having an outside basis in...
Kevin and Mary are 50/50 partners in ABC partnership with each having an outside basis in their partnership interest of $160,000. The partnership distributes cash of $80,000 to Kevin and Inventory with a basis of $40,000 and a FMV of $80,000 to Mary. Do Kevin or Mary have any gain or loss on the distributions? What basis does each take in the assets received?
Jack Corporation is owned 75% by Sherri and 25% by Mark. Sherri and Mark have $125,000...
Jack Corporation is owned 75% by Sherri and 25% by Mark. Sherri and Mark have $125,000 and $50,000 bases in their stock, respectively. Jack Corporation adopts a plan of liquidation on March 1. On April 12, Sherri receives the following property as a liquidating distribution: cash of $30,000; land, $125,000 FMV; and 150 shares of Green Corporation stock, $30,000 FMV. The land is subject to a $20,000 mortgage. On the same date, Mark receives $10,000 FMV of Green stock (50...
12. Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After...
12. Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.                                                        FMV         Adjusted Basis          Appreciation             Cash                          $  200,000     $     200,000             Building                           50,000               10,000                       40,000             Land                               150,000            100,000                      50,000             Total                           $  400,000     $     310,000              $    90,000 Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax basis in her WFI stock is $60,000. Danielle will receive the building and land...
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating...
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.                                                        FMV         Adjusted Basis          Appreciation             Cash                          $  200,000     $     200,000             Building                           50,000               10,000                    40,000             Land                               150,000               80,000                   70,000             Total                           $  400,000     $     290,000              $    110,000           Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax basis in her WFI stock is $40,000. Danielle will receive the building and land...
A. Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After...
A. Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.                                                        FMV         Adjusted Basis          Appreciation             Cash                          $  200,000     $     200,000             Building                           50,000               10,000                       40,000             Land                               150,000             95,000                      55,000             Total                           $  400,000     $     305,000              $    95,000           Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax basis in her WFI stock is $55,000. Danielle will receive the building and land...
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating...
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions, Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.                                                        FMV         Adjusted Basis          Appreciation             Cash                          $ 200,000     $     200,000             Building                           50,000               10,000                       40,000             Land                               150,000               85,000                       65,000             Total                           $  400,000     $     295,000              $    105,000           Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax...
Flag Nick and Danielle decided to liquidate their jointly owned corporation, Dannick Corporation. After liquidating its...
Flag Nick and Danielle decided to liquidate their jointly owned corporation, Dannick Corporation. After liquidating its remaining inventory and paying off its remaining liabilities, Dannick owned cash of $400,000; equipment with a basis of $200,000 and a fair market value of $400,000; and a building with a basis of $300,000 and a fair market value of $200,000. Under the terms of the agreement, Nick will receive the $400,000 cash in exchange for his 40 percent interest in Dannick. Nick’s basis...
Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating...
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: FMV Adjusted Basis Appreciation (Depreciation) Cash $ 409,750 $ 409,750 Building 73,250 24,000 49,250 Land 336,500 397,500 (61,000) Total $ 819,500 $ 831,250 $ (11,750) Under the terms of the agreement, Tiffany will receive the $409,750 cash in exchange for her 50 percent interest in ROF. Tiffany's...
Simon is a 30 percent partner in the SBD Partnership, a calendar year-end entity. As of...
Simon is a 30 percent partner in the SBD Partnership, a calendar year-end entity. As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities. On December 31, SBD makes a proportionate distribution of the following assets to Simon: Tax Basis FMV Cash $ 40,000 $ 40,000 Inventory 55,000 65,000 Land 30,000 45,000 Totals $ 125,000 $ 150,000 a1. What are the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT