Tony and Reed operate Starkly Fantastic, Inc., a superhero technology company. T
ID: 2544143 • 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
1. Tony will Get = $ 450,000 *60/100 = $ 270,000
Reed Will Get = $ 450,000*40/100 = $ 130,000
2. Loss on Sale of Land = Sale Price - Basis of Transfer
= $ 150,000 - $ 300,000
= $ 150,000 Loss
3. Company Loss on Island = Basis - Distribution to partner
= $ 700,000 - $ 450,000
= $ 250,000 Loss
Company Loss on Helicarrier navigation equipment= Basis - Amount Get
= $ 300,000 - 0 (NO information provided so taken as 0)
= $ 300,000 Loss
Loss on Sale of Land = Sale Price - Basis of Transfer
= $ 150,000 - $ 300,000
= $ 150,000 Loss
loss on each property may the company deduct = $ 250,000+$300,000+$150,000
= $ 700,000