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17 January, 20:10

Paula receives a nonliquidating distribution from Pell Corporation. Paula's basis for her Pell stock is $10,000. In exchange for her stock, Paula receives real estate with an $8,000 basis and a $15,000 fair market value that is subject to a $2,000 mortgage. What is Paula's basis in the real estate she received?

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  1. 17 January, 20:22
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    Answer: $13000

    Explanation:

    From the question, we are told that Paula receives a nonliquidating distribution from Pell Corporation. Paula's basis for her Pell stock is $10,000 and in exchange for her stock, Paula receives real estate with an $8,000 basis and a $15,000 fair market value that is subject to a $2,000 mortgage.

    The amount of Paula's basis in the real estate she received will be the net fair market value of the real Estate. It should be noted that this is the difference between the market value and the mortgage amount. This will be:

    = $15,000 - $2,000

    = $13,000
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