The stock of Lavender Corporation is held as follows: 80% by Jade Corporation (basis of $400,000) and 20% by Tiffany (basis of $100,000). Lavender Corporation is liquidated in December of the current year, pursuant to a plan adopted earlier in the year. Pursuant to the liquidation, Lavender Corporation distributed Asset A (basis of $600,000, fair market value of $900,000) to Jade, and Asset B (basis of $250,000, fair market value of $225,000) to Tiffany. No election is made under § 338. With respect to the liquidation of Lavender:
A) Lavender recognizes a loss of $25,000 on the distribution of Asset B.
B) Jade has a basis in Asset A of $900,000.
C) Tiffany has a basis in Asset B of $225,000.
D) Jade recognizes a gain of $500,000.
E) Lavender recognizes a gain of $300,000 on the distribution of Asset A.

Question

Quizplus · Accepted Answer

The Answer of The stock of Lavender Corporation is held as follows: 80% by Jade Corporation (basis of $400,000) and 20% by Tiffany (basis of $100,000). Lavender Corporation is liquidated in December of the current year, pursuant to a plan adopted earlier in the year. Pursuant to the liquidation, Lavender Corporation distributed Asset A (basis of $600,000, fair market value of $900,000) to Jade, and Asset B (basis of $250,000, fair market value of $225,000) to Tiffany. No election is made under § 338. With respect to the liquidation of Lavender:
A) Lavender recognizes a loss of $25,000 on the distribution of Asset B.
B) Jade has a basis in Asset A of $900,000.
C) Tiffany has a basis in Asset B of $225,000.
D) Jade recognizes a gain of $500,000.
E) Lavender recognizes a gain of $300,000 on the distribution of Asset A.

The Stock of Lavender Corporation Is Held as Follows: 80