During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $370,000, a fair market value of $550,000, and is subject to a liability of $450,000. Kena, who takes the land subject to the liability, has a basis of $50,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?
A)Kena recognizes a gain of $50,000.
B)Ecru Corporation recognizes a gain of $80,000.
C)Kena has a basis of $100,000 in the land.
D)Kena has a basis of $370,000 in the land.
E)None of the above.

Question

Quizplus · Accepted Answer

The Answer of During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $370,000, a fair market value of $550,000, and is subject to a liability of $450,000. Kena, who takes the land subject to the liability, has a basis of $50,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?
A)Kena recognizes a gain of $50,000.
B)Ecru Corporation recognizes a gain of $80,000.
C)Kena has a basis of $100,000 in the land.
D)Kena has a basis of $370,000 in the land.
E)None of the above.

During the Current Year, Ecru Corporation Is Liquidated and Distributes