Question 34 Cookies Corporation distributed land to Cake Corporation, its sole s

Question

Question 34

Cookies Corporation distributed land to Cake Corporation, its sole shareholder. On the date of distribution, the land had a fair market value of $85,000 and an adjusted basis to Cookies of $42,000. What is the amount of Cookies’ gain on the distribution?

a. $0

b. $42,000

c. $43,000

d. $85,000

Question 35

Richard, Bev and Mollie form Murphy Corporation. Richard transfers land worth $80,000 (adjusted basis is $25,000) for 80 shares, Mollie transfers $40,000 cash for 40 shares and Bev transfers equipment worth $40,000 (adjusted basis is $16,000) and $40,000 of services for 80 shares. Bev’s tax consequences are:

A. $64,000 recognized gain; basis in 80 shares of $80,000

B. $40,000 recognized gain; basis in 80 shares of $56,000

C. $24,000 recognized gain; basis in 80 shares of $40,000

D. $0 recognized gain; basis in 80 shares of $16,000

Explanation / Answer

SOLUTION

34.  Amount of Cookies’ gain on the distribution is $43,000.

Gain on distribution = Faire market value - Adjusted basis

= $85,000 - $42,000

= $43,000

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.