Gary and Laura decided to liquidate their jointly owned corporation, Amelia, Inc. After liquidating its remaining inventory and paying off its remaining liabilities, Amelia had the following tax accounting balance sheet. Adjusted basis FMV AppreciationCash$100,000 $100,000 Building150,000 200,000 50,000Land50,000 120,000 70,000Total$300,000 $420,000 $120,000 Under the terms of the agreement, Gary will receive the $100,000 cash in exchange for his interest in Amelia. Gary's tax basis in his Amelia stock is $30,000. Laura will receive the building and land in exchange for her interest in Amelia. Laura's tax basis in her Amelia stock is $60,000.What amount of gain or loss does Laura recognize in the complete liquidation and what is Laura's tax basis in the building and land
after the complete liquidation?
What will be an ideal response?
Laura recognizes gain of $260,000 on the transfer of her stock to Amelia ($320,000 ? $60,000) in complete liquidation of Amelia. Her basis in the building is $200,000 and her basis in the land is $120,000.
Distributions in complete liquidation to individual shareholders are taxable to the shareholders and noncash property received takes a basis equal to fair market value.
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