[Mars2010]

Mintee Corp., an accrual-basis calendar-year C corporation, had no corporate shareholders when it liquidated in Year 1. In

cancellation of all their Mintee stock, each Mintee shareholder received in Year 1 a liquidating distribution of $2,000 cash and

land with tax basis of $5,000 and a fair market value of $10,500. Before the distribution, each shareholder’s tax basis in Mintee

stock was $6,500. What amount of gain should each Mintee shareholder recognize on the liquidating distribution?

a. $0

b. $500

c. $4,000

d. $6,000

Ans. is d 6,000

I do not know why the gain recognized on the land distributed is not added back to the basis? and hence the gain will be 500.

to be as follows:

Cash received + FMV of land received – (Basis + gain recognized on distributed land)

2,000 + 10,500 – (6,500 before dist + 5,500) = 500

Regards.

[xl2333]

because a liquidating distribution is treated as sale of shareholder interest, the gain recognized is the fmv of everything they received minus the basis.

it is different from a regular property distribution, where you would add the gain back to corp E&P, hope that make sense

[xl2333]

because a liquidating distribution is treated as sale of shareholder interest, the gain recognized is the fmv of everything they received minus the basis.

it is different from a regular property distribution, where you would add the gain back to corp E&P, hope that make sense

[Whopper Warrior]

Corporate Gains / Losses / Revenues / Expenses do not effect a shareholders basis. The corporation will be taxed, but the shareholder will not. The revenue of a corporation, E&p, is tied to distribution (dividend, return of basis, or gain). A liquidating dividend is considered a sale, and does not take E&p into consideration.

Corporate Basis =/= partnership basis

Think of owning a share of IBM, you are taxed on dividends; but are you also taxed when IBM sells their office buildings? No. Your basis is usually only effected when you sell. Very rarely does corporation basis go up without more $ investment; unless someone dies and you inherit it appreciated.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Whopper Warrior]

Corporate Gains / Losses / Revenues / Expenses do not effect a shareholders basis. The corporation will be taxed, but the shareholder will not. The revenue of a corporation, E&p, is tied to distribution (dividend, return of basis, or gain). A liquidating dividend is considered a sale, and does not take E&p into consideration.

Corporate Basis =/= partnership basis

Think of owning a share of IBM, you are taxed on dividends; but are you also taxed when IBM sells their office buildings? No. Your basis is usually only effected when you sell. Very rarely does corporation basis go up without more $ investment; unless someone dies and you inherit it appreciated.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Tobecpa1]

The same question, but if the question asked for nonliquidating distribution, then the calculation below is correct? Anyone…please share your knowledge. Thanks.

Mintee Corp., an accrual-basis calendar-year C corporation, had no corporate shareholders when it liquidated in Year 1. In

cancellation of all their Mintee stock, each Mintee shareholder received in Year 1 a NONliquidating distribution of $2,000 cash and

land with tax basis of $5,000 and a fair market value of $10,500. Before the distribution, each shareholder's tax basis in Mintee

stock was $6,500. What amount of gain should each Mintee shareholder recognize on the NONliquidating distribution?

Cash received + FMV of land received – (Basis + gain recognized on distributed land)

2,000 + 10,500 – (6,500 before dist + 5,500) = 500

[Tobecpa1]

The same question, but if the question asked for nonliquidating distribution, then the calculation below is correct? Anyone…please share your knowledge. Thanks.

Mintee Corp., an accrual-basis calendar-year C corporation, had no corporate shareholders when it liquidated in Year 1. In

cancellation of all their Mintee stock, each Mintee shareholder received in Year 1 a NONliquidating distribution of $2,000 cash and

land with tax basis of $5,000 and a fair market value of $10,500. Before the distribution, each shareholder's tax basis in Mintee

stock was $6,500. What amount of gain should each Mintee shareholder recognize on the NONliquidating distribution?

Cash received + FMV of land received – (Basis + gain recognized on distributed land)

2,000 + 10,500 – (6,500 before dist + 5,500) = 500

[Jim]

Actually, in this one you would say that each stock holder had a basis in the stock of $6,500. Then, you would Take the Fair market value (FMV) of the land $10,500 and subtract the basis of $6,500. That gives you a basis of $4,000. But wait there is more. The stockholder also received boot or cash. SO, you say $4,000+ $2,000 and arrive at a gain of $6,000.

[Operation_CPA]

Posted this in the REG study group but no one responded. Can someone please provide some clarity on this? Based off of the Becker lectures, I know that a gain or loss will be recognized to a liquidating corporation on the distribution of property in complete liquidation as if the property were sold to the distributee at its fair market value. However:

(1) What if the assets were distributed to an 80%+ shareholder? My understanding is that the corporation distributing the assets would not recognizes a gain in this situation. Is this correct?
(2). What would the basis be in the property received to the 80% shareholder? Would it be the FMV?
(3). Does the shareholder recognize a gain?

Appreciate the help.

[Author]

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