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51) Sandy, a cash method of accounting taxpayer, has a

Question : 51) Sandy, a cash method of accounting taxpayer, has a : 1876442

51) Sandy, a cash method of accounting taxpayer, has a basis of $46,000 in her 500 shares of Newt Corporation stock. She receives the following distributions as part of Newt's plan of liquidation.

March 31, 2007

$10,000

July 15, 2007

10,000

November 15, 2007

10,000

January 15, 2008

10,000

The amount of the final distribution is not known on December 31, 2007. What are the tax consequences of the distributions?

A) Sandy will recognize a loss of $4,500 in 2007 and a $1,500 loss in 2008.

B) Sandy will recognize the entire loss in 2007.

C) Sandy will recognize the entire loss in 2008.

D) None of the above is correct.

52) Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs. 332 and 337. Bass Corporation distributes land to its minority shareholder, John, who owns a 15% interest. The property received by John has a $55,000 FMV. The land was used in the Bass Corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability, which is assumed by John. John's basis in his stock is $25,000. What gain or loss will John and Bass Corporation recognize on the distribution of the land?

A)

John

Bass

$20,000 gain

$-0-

B)

John

Bass

$20,000 gain

$10,000 loss

C)

John

Bass

$30,000 gain

$-0-

D)

John

Bass

$30,000 gain

$10,000 loss

53) Greg, a cash method of accounting taxpayer, owns 100 shares of Parker Corporation stock with a basis of $20,000. Greg receives two liquidating distributions of $8,000 on March 3 of last year, and $8,000 on August 8 of this year. The amount of the second distribution is not known until June 15 of this year. Greg recognizes

A) a gain of $8,000 last year and a loss of $12,000 this year.

B) a loss of $2,000 last year and a loss of $2,000 this year.

C) no loss last year and a $4,000 loss this year.

D) none of the above

54) Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000. Barbara receives two liquidating distributions, including $16,000 paid last year and $20,000 paid in the current year. An additional distribution of an undetermined amount is expected next year. On last year's tax return, Barbara can recognize a loss of

A) $0.

B) $1,000.

C) $4,000.

D) $14,000.

55) Hope Corporation was liquidated four years ago. Teresa reported a $40,000 long-term capital gain due to the liquidation on her individual tax return. This year, Teresa pays $6,000 as part of the settlement of a lawsuit against Hope. Due to the $6,000 payment, Teresa recognizes a

A) $6,000 long-term capital loss.

B) $6,000 short-term capital loss.

C) $6,000 ordinary loss.

D) none of the above

56) Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. Gary's basis in the Key stock (a capital asset) surrendered is $120,000. If Gary relies on the open transaction doctrine, at the liquidation date he must recognize a

A) $0 gain.

B) $10,000 capital loss.

C) $30,000 capital loss.

D) $70,000 capital gain.

57) During 2013, Track Corporation distributes property to Cindy as part of a complete liquidation. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis. The first payment to Cindy of $8,000 for use of the copyrighted property occurs in 2014. Cindy has a basis in the Track stock of $95,000 immediately preceding the liquidation. The minimum amount of gain that Cindy must recognize is a

A) $3,000 gain in 2014.

B) $0 gain in 2013.

C) $3,000 gain in 2013, which is reported on an amended current-year tax return that is filed in 2014.

D) none of the above.

58) Identify which of the following statements is false.

A) An individual taxpayer, who is assessed an additional payment of money based on stock ownership in a corporation whose stock is redeemed in a complete liquidation, may recognize a capital loss to the extent of the additional assessment.

B) The open transaction doctrine defers the shareholder's gain or loss from a liquidation until the assets can be valued by sale or collection.

C) The open transaction doctrine as applied to complete corporate liquidations refers to the numerous planning alternatives available when liquidating a corporation.

D) The IRS asserts that the open transaction doctrine should be used only in extraordinary circumstances.

59) Identify which of the following statements is true.

A) Upon liquidation, any capitalized expenditures unamortized at the time of liquidation should be deducted if they have no further value to the corporation.

B) Shareholders who receive an installment obligation as part of their liquidating distribution ordinarily report the FMV of their obligation as part of the consideration received to calculate the amount of recognized gain or loss.

C) A liquidating corporation treats expenses associated with selling its property as an offset against the sales proceeds.

D) All the above are true.

60) Homewood Corporation adopts a plan of liquidation on June 15 and shortly thereafter sells a parcel of land on which it realizes a $50,000 gain (excluding the effects of a $5,000 sales commission). Homewood pays its legal counsel $2,000 to draft the plan of liquidation. The accountant fees for the liquidation are $1,000, which are also paid during the year. What is Homewood Corporation's realized gain on the sale of land and deductible liquidation expenses?

A)

Gain

Liquidation Expenses

$45,000

$3,000

B)

Gain

Liquidation Expenses

$50,000

$2,000

C)

Gain

Liquidation Expenses

$55,000

$3,000

D)

Gain

Liquidation Expenses

$50,000

$1,000

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