Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: Adjusted FMV Таx Basis Appreciation $ 165,000 33,000 $ 165,000 16,500 Cash Building 16,500 132,000 66,000 $ 247,500 Land 66,000 $ 330,000 $ 82,500 Total Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFI stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) c. What amount of gain or loss does Danielle recognize in the complete liquidation? Gain or loss recognized
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: Adjusted FMV Таx Basis Appreciation $ 165,000 33,000 $ 165,000 16,500 Cash Building 16,500 132,000 66,000 $ 247,500 Land 66,000 $ 330,000 $ 82,500 Total Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFI stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) c. What amount of gain or loss does Danielle recognize in the complete liquidation? Gain or loss recognized
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
Problem 48P
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Transcribed Image Text:Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Incorporated (WFI). After
liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance
sheet:
Adjusted
FMV
Таx Basis
Appreciation
$ 165,000
33,000
$ 165,000
16,500
Cash
Building
16,500
132,000
66,000
$ 247,500
Land
66,000
$ 330,000
$ 82,500
Total
Under the terms of the agreement, Shauna will receive the $165,000 cash in exchange for her 50 percent interest in WFI.
Shauna's tax basis in her WFI stock is $41,250. Danielle will receive the building and land in exchange for her 50 percent
interest in WFI. Danielle's tax basis in her WFI stock is $82,500. Assume for purposes of this problem that the cash
available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a
result of the liquidation. (Negative amounts should be indicated by a minus sign.)
c. What amount of gain or loss does Danielle recognize in the complete liquidation?
Gain or loss recognized
Expert Solution
Step 1
C. The amount of gain or loss does Danielle recognize in the complete liquidation
In complete liquidation, Danielle would recognize an amount of $82,500 ($165,000-$82,500) as gain on the transfer of the stock to WFI.
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