Blog

Owen and Hermine, a married couple, have jointly owned Spark…

Owen and Hermine, a married couple, have jointly owned Sparkleberry Corp. for many years. Their basis in the stock is $250,000. Sparkleberry liquidates and makes liquidating distributions to the couple as follows:   PropertyFair valueCash$20,000Accounts receivable$35,000Vehicle$40,000Office furniture$10,000   What are the amount and character of Owen and Hermine’s gain (loss)? (assume the Sparkleberry stock qualifies as Sec. (§) 1244 stock and that no loss disallowance rules apply)

Lisa and Richard wish to acquire Acacia Corp., a C corporati…

Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:     Fair value Adjusted basis Assets:     Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000       Liabilities:     Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   [question 3 of 4] How much gain or loss must Acacia recognize if the transaction is structured as a direct asset sale to Lisa and Richard (and they assume Acacia’s liabilities)?

Martin is a shareholder of Sand Pine Corp. After adopting a…

Martin is a shareholder of Sand Pine Corp. After adopting a plan of liquidation, Sand Pine makes a liquidating distribution to Martin of land with a fair value of $100,000 and an adjusted basis (to Sand Pine) of $80,000. Martin’s basis in the Sand Pine stock was $50,000 before the distribution.   [question 2 of 2] What amount of gain does Sand Pine recognize on the liquidating distribution?