Answer:
$0 gain or loss
Cash basis $10,000
Inventory $15,000
Explanation:
Calculation for Mia’s recognized gain or loss on the liquidation and basis in the property received
First step is for us to calculate for the outside adjusted basis
Using this formula
Outside adjusted basis=Outside basis - Liabilities
Let plug in the formula
Outside adjusted basis=$50,000 - $25,000
Outside adjusted basis= $25,000
Second step is to calculate for theGain or loss
Using this formula
Gain/Loss=Outside adjusted basis- Cash received - Inside basis
Let plug in the formula
Gain/Loss =$25,000 -$10,000 -$20,000
Gain/Loss = ($5,000)
Based on the above calculation for Mia Gain/loss in which Mia had ($5,000) this means there is $0 gain or loss
Third step is to calculate for the Inventory
Using this formula
Inventory = Cash + Gain/Loss
Let plug in the formula
Inventory =$10,000 + $5,000
Inventory = $15,000
In summary Mai will have $0 gain or loss, the Cash basis amount will be $10,000 while the Inventory amount will be $15,000
