Question

Exercise 20-15 (LO. 1) On January 4, 2018, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351, The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Fair Market Built in Gain Shareholder's Basis $300,000 $525,000 or (Loss) $375,000 $75,000 $400,000 ($125,000) ($50,000) Value Property 1 Property 2 Net built-in loss Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 30% shareholder when the property is worth $350,000. a. Compute Martin's basis in Property 1 and in Property 2 as of January 4, 2018. Martin's basis is Property 1 is a carryover basis of $ Martin's basis in Property 2 is a stepped-down V basis of $ b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2 Martin has a realized loss of and a recognized loss of Feedback Check My Work when property is transferred to a corporation in a § 351 transaction or as a contribution to capital, carryover basis rules generally apply. Without special limitations, a transfer of loss property in a carryover basis transaction would present opportunities for the duplication of losses.

Answer 1