What is Alexander's net gain or loss on the liquidation of his 100 percent interest in an S corporation if the corporation distributes the following three assets to him in exchange for his stock: $\begin{array}{lll}\text { Asset }&\text { FMV }&\text { Adj. Basis }\\hline
\text { Inventory } & \$ 20,000 & \$ 13,000 \
\text { Machines } & \$ 50,000 & \$ 60,000 \
\text { Building } & \$ 100,000 & \$ 75,000
\end{array}$ Prior to any distributions, Alexander's basis in his S corporation interest was $160,000.
A) ($12,000)
B) ($22,000)
C) $10,000
D) $22,000

Question

Quizplus · Accepted Answer

The net gain or loss on the liquidation of an S corporation interest is the difference between the fair market value of the assets distributed and the adjusted basis of the stock. In this case, the fair market value of the assets distributed is $170,000 ($20,000 + $50,000 + $100,000), and the adjusted basis of the stock is $160,000. Therefore, the net gain on the liquidation is $10,000 ($170,000 - $160,000).

What Is Alexander's Net Gain or Loss on the Liquidation