Liquidation- General Rules ( 331 and 336). I, an individual, owns all of the stock...
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Liquidation- General Rules ( 331 and 336). I, an individual, owns all of the stock of T Corporation. I formed the business seven years ago in a tax-free $ 351 transaction by contributing $100,000 cash and assets with a basis of $300,000 and a fair market value of $700,000. I decided to completely liquidate T Corporation, and all the assets of T are distributed to I. The balance sheet for T immediately prior to the liquidation is as follows:
| Basis | Fair Market Value | ||
| Cash | $10,000 | $10,000 | |
| Accounts receivable | 100,000 | 70,000 | |
| Equipment | $400,000 | ||
| Less: Accumulated depreciation | (250,000) | 150,000 | 120,000 |
| Total Assets | 260,000 | 200,000 | |
| Retained earnings (deficit) | ($140,000) | $0 | |
| Common stock | 400,000 | 200,000 | |
| Total equity | 260,000 | 200,000 |
a. How much gain or loss, if any, will T Corporation recognize as a result of the liquidation?
b. What is I's recognized gain or loss?
c. What is I's basis in the assets received?
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