Question

Brenda owns 100 percent of Walker Corp. She has a basis for her stock of $20,000. The corporation’s only assets are cash of $20,000 and land with a basis of $75,000 and a value of $95,000. Earnings and profits are $125,000. Walker Corp. liquidates and distributes its assets to Brenda, whose stock is cancelled. a. What is the gain recognized by Walker Corp.

Answer 1

Answer: $20,000

Step-by-step explanation:

Given that,

Brenda owns 100 percent of Walker Corp.

Basis of Stock = $20,000

Cash = $20,000

Land with a basis = $75,000

Land with a value = $95,000

Gain recognized by Walker Corp = Value of land - Basis of land

= $95,000 - $75,000

= $20,000

Therefore, the gain recognized by walker corp. is $20,000.