Question

Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land held for three years as an investment (adjusted basis of $250,000, fair market value of $490,000). The land is subject to a liability of $520,000.a. What are the tax consequences to Oriole Corporation on the distribution of the land?b. If the land is, instead, subject to a liability of $400,000, what are the tax consequences to Oriole on the distribution?

Answer 1

A. $270,000 gain

B. $240,000 gain

Step-by-step explanation:

A. Calculation to determine the tax consequences to Oriole Corporation on the distribution of the land

Tax consequences=$520,000 – $250,000

Tax consequences=$270,000 gain

Therefore Oriole will recognize a $270,000 gain on the distribution

B. Calculation to determine the tax consequences to Oriole on the distribution

Tax consequences=$490,000 – $250,000

Tax consequences= $240,000 gain

Therefore Oriole will recognize a gain of $240,000 on the distribution.