Question

Pursuant to a complete liquidation, Carrot Corporation distributes to its shareholders real estate held as an investment (basis of $650,000, fair market value of $880,000). a. Determine the gain or Raabe, William A.. South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts (p. 6-31). Cengage Learning. Kindle Edition.

Answer 1

Carrot's gain = $230,000

Step-by-step explanation:

given data

basis = $650,000

fair market value = $880,000

solution

we know that Carrot corporation recognize that both gains and losses on liquidation distribution as if its sold at the fair market value

so here Carrot's gain is express as

Carrot's gain = fair market value - basis ......................1

put here value we get

Carrot's gain = $880,000 - $650,000

Carrot's gain = $230,000