Question

Under a plan of complete​ liquidation, Key Corporation distributes land​ (not a disqualified​ property) with an adjusted basis of​ $410,000 and an FMV of​ $300,000 for all​ Sharon's stock.​ Sharon's basis in her​ 5% interest in the Key stock is​ $250,000. Find​ Sharon's basis in the land and Key​ Corporation's recognized gain or loss.

Answer 1

Answer:

$300,000 and ($110,000)

Explanation:

Under a plan of complete​ liquidation, Key Corporation distributes land​ (not a disqualified​ property) with an adjusted basis of​ $410,000 and an FMV of​ $300,000 for all​ Sharon's stock.​

Sharon's basis in her​ 5% interest in the Key stock is​ $250,000.

Therefore​ Sharon's basis in the land will be the fair market value at the date of transfer which is $300,000

and

Key​ Corporation's recognized gain or loss on disposal will be the carrying value/adjusted basis less the market value which is the deemed sale value

$410,000 - $300,000 = ($110,000) it is a loss since it is disposed for less than its value