Under a plan of complete liquidation, Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William, a 25% shareholder. William has a $200,000basis in his Coast stock. The land is inventory in the hands of Coast Corporation. Coast Corporation must recognize.

a. No gain

b. $100,000 of ordinary income.

c. $100,000 of long-term capital gain.

d. $200,000 of ordinary income.

Question

Hadley Brown

Business

5 September, 19:13

Under a plan of complete liquidation, Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William, a 25% shareholder. William has a $200,000basis in his Coast stock. The land is inventory in the hands of Coast Corporation. Coast Corporation must recognize.

a. No gain

b. $100,000 of ordinary income.

c. $100,000 of long-term capital gain.

d. $200,000 of ordinary income.

+4

Answers (1)

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Rowan · Answer 1

Answer: B. $100,000 of ordinary income

Explanation:

From that above question, the company distributed land with adjusted basis of $300,000 to Williams who had $200,000 in his coast stock.

This means Williams has gained $100,000 ordinary income because of the adjustment.