Tony and Reed operate Starkly Fantastic, Inc., a superhero technology company. T
ID: 2544121 • Letter: T
Question
Tony and Reed operate Starkly Fantastic, Inc., a superhero technology company. Tony owns 60%, Reed 40%. On June 15, 2015, Tony transferred the following property to the company in a Section 351 transaction: 1. An island off the east coast which the company intended to use to build a new base of SHIELD (FMV: $500,000; Basis: $700,000); 2. Helicarrier navigation equipment: (FMV: $410,000; basis: $200,000); and 3. land held for investment (FMV: $200,000; basis: $300,000).
However, after Robert Redford infiltrated SHIELD on behalf of HYDRA, the deal evaporated and the company adopted a plan of complete liquidation on April 30, 2017. On March 10, 2018, the company distributed the properties as follows:
1.The island (FMV: $450,000) was distributed, pro rata to Tony and Reed.
2.The land (FMV: $150,0000) was sold to a third party.
3.How much of the loss on each property may the company deduct?
Explanation / Answer
TONY
60%
REED
40%
Loss on Island (pro - rate basis)
(7,00,000 - 4,50,000) = 2,50,000
Loss on Land
(3,00,000 - 1,50,000) = 1,50,000
(As in question zero was added wrongly, which can be identifed through comma)
Profit in Helicarrier
(4,10,000 - 2,00,000) = 2,10,000
As nothing express in sum, but liqudation means selling of all assets.
Particular L.F.TONY
60%
REED
40%
Loss on Island (pro - rate basis)
(7,00,000 - 4,50,000) = 2,50,000
(1,50,000) (1,00,000)Loss on Land
(3,00,000 - 1,50,000) = 1,50,000
(As in question zero was added wrongly, which can be identifed through comma)
(90,000) (60,000)Profit in Helicarrier
(4,10,000 - 2,00,000) = 2,10,000
As nothing express in sum, but liqudation means selling of all assets.
1,26,000 84,000 Net Amount to be deducted (1,14,000) (76,000)