Liquidation- General Rules ( 331 and 336). I, an individual, owns all of the stock...
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Liquidation- General Rules ( 331 and 336). I, an individual, owns all of the stock of T Corporation. I formed the business seven years ago in a tax-free $ 351 transaction by contributing $100,000 cash and assets with a basis of $300,000 and a fair market value of $700,000. I decided to completely liquidate T Corporation, and all the assets of T are distributed to I. The balance sheet for T immediately prior to the liquidation is as follows:
Basis
Fair Market Value
Cash
$10,000
$10,000
Accounts receivable
100,000
70,000
Equipment
$400,000
Less: Accumulated depreciation
(250,000)
150,000
120,000
Total Assets
260,000
200,000
Retained earnings (deficit)
($140,000)
$0
Common stock
400,000
200,000
Total equity
260,000
200,000
a. How much gain or loss, if any, will T Corporation recognize as a result of the liquidation?
b. What is I's recognized gain or loss?
c. What is I's basis in the assets received?
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