Ch. 19 question 53 parts e & f. Assume Tiffany owns 40% of the ROF stock and Car
ID: 2363288 • Letter: C
Question
Ch. 19 question 53 parts e & f. Assume Tiffany owns 40% of the ROF stock and Carlos owns 60%. Tiffany will receive $160,000 in the liquidation & Carlos will receive the land & building plus $40,000. e) What amount of gain or loss does ROF recognize in the complete liquidation? f) What amount of gain or loss does Carlos recognize in the complete liquidation? Given: FMV Tax Adjusted Basis Appreciation (Depreciation) Cash $200,000 $200,000 Building 50,000 10,000 $40,000 Land 150,000 200,000 (50,000) Total $400,000 $410,000 $(10,000)Explanation / Answer
Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $160,000 in the liquidation and Carlos will receive the land and building plus $40,000. e. What amount of gain or loss does ROF recognize in the complete liquidation?
Answer:
ROF recognizes gain of $40,000 on the transfer of the building, but cannot recognize loss of $50,000 on the transfer of the land. This distribution is nonpro rata and the recipient, Carlos, is a related person because he owns more than 50 percent of WFI stock.
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What amount of gain or loss does Tiffany recognize in the complete liquidation?
Tiffany recognizes gain of $110,000 on the transfer of her stock to WFI ($160,000 - $50,000)
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. g. What amount of gain or loss does Carlos recognize in the complete liquidation?
: Carlos recognizes gain of $140,000 on the transfer of his stock to WFI ($240,000 - $100,000).