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31 March, 11:35

Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives

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  1. 31 March, 11:47
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    No loss recognized by Cardinal and a basis in the land of $800,000

    Explanation:

    In the given case, Cardinal is not allowed to recognize the loss of $200,000. It is so because Robin is a related person and the distribution is non pro rata. Robin's basis in the land will be equal to the land's fair market value. of $800,000
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