1. 1. In the current year, Orion Corporation (E & P of $2 million) distributes a

Question

1.   

1.      In the current year, Orion Corporation (E & P of $2 million) distributes all of its property in a complete liquidation. Allie, a shareholder, receives land having a fair market value of $300,000. Orion Corporation had purchased the land as an investment three years ago for $250,000, and the land was distributed subject to a $100,000 liability. Allie took the land subject to the $100,000 liability. What is Allie's basis in the land?

a.) $200,000

b.) $250,000

c.) $50,000

d.) $300,000

e.) None of the above

Explanation / Answer

The shareholder’s basis in assets received is their FMV at the time of the distribution. Basis is not affected by the shareholder’s assuming corporate liabilities or receiving corporate property that is subject to a liability.

Accordingly, in this case Allie's basis in the land is $ 300,000 i.e. FMV of Land

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