Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Appreciation (Depreciation) Adjusted FMV Tax Basis $ 275,500 73,000 $ 275,500 25,250 255,000 $ 555,750 Cash Building 47,750 Land 202,500 (52,500) $ 551,000 $ (4,750) Total Under the terms of the agreement, Tiffany will receive the $275,500 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $56,500. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $133,500. 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.) Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $220,400 in the liquidation and Carlos will receive the land and building plus $55,100. e. What amount of gain or loss does ROF recognize in the complete liquidation? Gain or loss recognized
Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Appreciation (Depreciation) Adjusted FMV Tax Basis $ 275,500 73,000 $ 275,500 25,250 255,000 $ 555,750 Cash Building 47,750 Land 202,500 (52,500) $ 551,000 $ (4,750) Total Under the terms of the agreement, Tiffany will receive the $275,500 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $56,500. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $133,500. 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.) Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $220,400 in the liquidation and Carlos will receive the land and building plus $55,100. e. What amount of gain or loss does ROF recognize in the complete liquidation? Gain or loss recognized
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 15CE
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Transcribed Image Text:Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its
remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet:
Adjusted
Appreciation
(Depreciation)
FMV
Таx Basis
$ 275,500
73,000
$ 275,500
25,250
255,000
Cash
47,750
(52,500)
$ (4,750)
Building
Land
202,500
$ 551,000
$ 555,750
Total
Under the terms of the agreement, Tiffany will receive the $275,500 cash in exchange for her 50 percent interest in ROF.
Tiffany's tax basis in her ROF stock is $56,500. Carlos will receive the building and land in exchange for his 50 percent
interest in ROF. His tax basis in the ROF stock is $133,500. 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.)
Assume Tiffany owns 40 percent of the ROF stock and Carlos owns 60 percent. Tiffany will receive $220,400 in the liquidation and
Carlos will receive the land and building plus $55,100.
e. What amount of gain or loss does ROF recognize in the complete liquidation?
Gain or loss recognized
Expert Solution
Step 1
The Appreciated value of Building on complete liquidation = $47,750
Land is Depreciated by = 52,500
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