Question

19. Geranova Corporation is liquidated, with Vlad receiving $7,500 in money, other property having a $5,000 FMV, and a $2,000 mortgage on the property. Vlad’s basis in his Geranova Co. stock is $7,000. Upon liquidation, Vlad must recognize a gain of

A) 2,000.  

B) $3,500.

C) $5,000.

D) $12,500.

20. Illinois Corporation is undergoing a complete liquidation and distributes land to Maria, one of its shareholders, in exchange for all of Maria's stock. The land has a basis of $300,000 and an FMV of $400,000 on Illinois Corporation's books and is subject to a $325,000 liability. Maria assumes the liability on the property. Maria's basis in her Illinois Corporation stock is $100,000. What is the amount of gain or loss recognized by Maria on the distribution?

A) No gain or loss is recognized

B) $175,000 gain

C) $25,000 gain

D) $25,000 loss

21. Under a plan of complete liquidation, NEIU Corporation distributes land with a $250,000 adjusted basis and a $350,000 FMV to Veronica, a 30% shareholder. Veronica has a $150,000 basis in her NEIU stock. The land is inventory in the hands of NEIU Corporation. NEIU Corporation must recognize

A) no gain.

B) $100,000 of long-term capital gain

C) $100,000 of ordinary income.

d) $350,000 of ordinary income.

Answer 1

ANSWER

19)

Geranova Corporation is liquidated, with Vlad receiving $7,500 in money, other property having a $5,000 FMV, and a $2,000 mortgage on the property. Vlad’s basis in his Geranova Co. stock is $7,000. Upon liquidation, Vlad’s must recognize a gain of ( 7500 + 5000 - 7000 - 2000 ) = $ 3500

Option B is correct.

20)

FMV of the assets distributed = $400,000

Liability assumed = $325,000

Net value for shares received by shares holders = $400,000 - $325,000 = $75,000

Basis in shares = $100,000

Gain to be recognized by shareholder = $75,000 - $100,000 = -$25,000

Hence, answer is $25,000 loss

Option D is correct.