Dove Corporation distributes all of its property in a complete liquidation. Alex

Question

Dove Corporation distributes all of its property in a complete liquidation. Alexandra (a 35% shareholder) receives a parcel of land having a fair market value of $100,000, in exchange for all her stock (basis $20,000, owned 3 years). The land (basis $125,000) has been used as a parking lot at Dove Corporation’s headquarters for the past 3 years. The land is also subject to a $25,000 liability which Alexandra assumes. What is the amount and character of the gain or loss recognized by Alexandra?

$80,000 LTCG.

$55,000 1231 gain.

$55,000 LTCG.

$80,000 1231 gain.

$80,000 LTCG.

$55,000 1231 gain.

$55,000 LTCG.

$80,000 1231 gain.

Explanation / Answer

Answer is option C

Fair market value = 100000

-adjusted basis = 20000

Recognised gain = 80000

- liability related to land = 25000

Realized long term capital gain = 55000

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