Question

Borasco Corp. owns land with a fair market value of $200,000. Borasco purchased the land 10 years ago for $65,000 and owes a liability of $50,000 as of August 2 of the current year. Alvo Corp. owns 100 percent of Borasco. Borasco is completely liquidated on August 2 of the current year, according to a plan adopted on June 18 of the current year. As a result, the land is transferred to Alvo in complete cancellation of Borasco's stock. What basis does Alvo have in the land it receives

Answer 1

Answer: B. $65,000

Explanation:

The options to the question are:

A. $15,000

B. $65,000

C. $150,000

D. $200,000

It should be noted that the corporate liquidations of property are typically treated as either an exchange or a sale and the profit or the loss made will be recognized by the corporation usually based on the liquidating sale of the assets of the corporation.

In certain cases whereby the distributee that is, the individual who is entitled to partake in the share of an estate distribution is a corporation that is in charge of the distributing corporation, this may lead to the distribution not to be taxable.

Due to this, Alvo has a basis of $65,000. The reason is that the land was not sold and therefore Alvo did not get $200,000.