A corporation distributes a piece of personal property to a shareholder, in complete liquidation. The corporation had a basis of

Question

cluponka [151]

2 years ago

5

A corporation distributes a piece of personal property to a shareholder, in complete liquidation. The corporation had a basis of

$40,000. The property's FMV is $30,000. The effect to the corporation is_____________.

Business

1 answer:

Rudiy27 · Answer 1 · 2022-05-15T18:01:42+03:00

Answer:

The corporation must recognize a $10,000 loss.

Explanation:

The last activity that a corporation must perform upon liquidation is to distribute property, assets or cash to its shareholders. The adjusted basis for any property or assets handed out in a complete liquidation is the fair market value of the property or assets.

In this case, the corporation's property had a basis of $40,000 but a fair market value of $30,000, so the distribution was done using the fair market value of $30,000.