Question

Jalen transferred his 10 percent interest to Wolverine Company as part of a complete liquidation of the company. In exchange, he received land with a fair market value of $100,000. Jalen's basis in the Wolverine stock was $50,000. The land had a basis for Wolverine Company of $80,000. What amount of gain does Jalen recognize in the exchange and what is his basis in the land he receives?

Answer 1

$50,000 and $100,000

Step-by-step explanation:

Answer 2

$50,000 and $100,000

Step-by-step explanation:

The recorded amount is shown below:

Since in the question, it is mentioned that the land fair market value is $100,000. His basis in stock was $50,000 and the land basis is $80,000

So, the gain on the exchange would be recognized of $50,000 whereas the land basis should be reported on the fair market value, not on the land basis. So, it would be reported for $100,000