Abby and Bera each owns 50 shares of stock in AB Corp, comprising all of AB Corp's outstanding stock. Abby's basis in her 50 shares of stock is $1,000. Bera's basis in her 50 shares of stock is $800. In a complete liquidation, AB Corp distributed cash of $2,000 to Abby and an equipment with a fair market value of $2,000 to Bera, in redemption of all of its outstanding stock. AB Corp's basis in the equipment is $1,500. Assume that AB Corp has a reserve for liquidating expenses and paying any tax incurred in connection with the liquidation. (a) What is the tax treatment to Abby? (b) What is the tax treatment to Bera? (c) What is the tax treatment to AB Corp?
Abby and Bera each owns 50 shares of stock in AB Corp, comprising all of AB Corp's outstanding stock. Abby's basis in her 50 shares of stock is $1,000. Bera's basis in her 50 shares of stock is $800. In a complete liquidation, AB Corp distributed cash of $2,000 to Abby and an equipment with a fair market value of $2,000 to Bera, in redemption of all of its outstanding stock. AB Corp's basis in the equipment is $1,500. Assume that AB Corp has a reserve for liquidating expenses and paying any tax incurred in connection with the liquidation. (a) What is the tax treatment to Abby? (b) What is the tax treatment to Bera? (c) What is the tax treatment to AB Corp?
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 33P
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Transcribed Image Text:Accounting
Abby and Bera each owns 50 shares of stock in
AB Corp, comprising all of AB Corp's
outstanding stock. Abby's basis in her 50 shares
of stock is $1,000. Bera's basis in her 50 shares
of stock is $800. In a complete liquidation, AB
Corp distributed cash of $2,000 to Abby and an
equipment with a fair market value of $2,000 to
Bera, in redemption of all of its outstanding
stock. AB Corp's basis in the equipment is
$1,500. Assume that AB Corp has a reserve for
liquidating expenses and paying any tax
incurred in connection with the liquidation.
(a) What is the tax treatment to Abby?
(b) What is the tax treatment to Bera?
(c) What is the tax treatment to AB Corp?
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