Distributions

Dollie Moore
South University Online

Land Basis $720,000

Land FMV $1,000,000
Securities Basis $110,000
Securities FMV $250,000
Maria's Stock 85%
Paul's Stock 15%
Decreased Land Value $500,000

a) Distribute all of the land to Maria.

None of the $220,000 loss relized will be recognized because Loss
Maria ia a related party and the land is disqualified property.

b) Distribute all of the land to Paul

Pink Corporation recognizes the $220,000 loss. The land valued
more than the basis on the date of the 351 transfer to Pink, the
built-in loss limitation does not apply. The related party loss
limitation does not apply because Paul is not a related party.

c) Distribute 85% of the land to Maria and 15% to Paul.

The land is disqualified property, reguardless that the distribution
was pro rata. The loss on the distribution to Maria of $187,000 Net Loss
would not be allowed because she is a related party and the Distribution to Maria
property is disqualified. Paul's loss of $33,000 of the $220,000
would be allowed because he is not a related party, so the related Distribution to Paul
party loss limitation does not apply.

d) Distribute 50% of the land to Maria and 50% to Paul.

$110,000 to Maria would not be allowed. Net Loss
$110,000 to Paul wold be allowed. 50% distribution to Maria
50% distribution to Paul

e) Sell the land and distribute the proceeds of $500,000 proportionately to M

The property did not have a built-in loss limitation on the date of the transfer, so the built-in
loss limitation does not apply. Also, on the sale of the property, the loss limitation for a
related party does not apply. This means that Pink Corporation would recognize the $220,000
loss.
 -$220,000

-$220,000
Distribution to Maria -$187,000
Distribution to Paul -$33,000

-$220,000
0% distribution to Maria -$110,000
0% distribution to Paul -$110,000

0,000 proportionately to Maria and to Paul.

 transfer, so the built-in
oss limitation for a
d recognize the $220,000
 Situation 2

E&P $560,000
Cash $175,000
FMV (marketable securities) $230,000
Basis (marketable securities) $250,000
FMV (unimproved land) $600,000
Basis (unimproved land) $300,000
Unsecured note payable $50,000
Mortgage $270,000
Net operating loss carryover $45,000
Stock Purchase (7 years ago) $160,000

a) How much gain (or loss) will Pink Corporation recognize upon the liquidating
distribution of its assets and liabilities to Wren Corporation?

Under 337, Pink will not recognize any gain/loss on the liquidation distribution of its
assets and liabilities to Wren. The liquidation meets the requirements of 332, and
seven years ago when Wren purchased the stock, a 338 was not available to Wren.

b) How much gain (or loss) will Wren Corporation recognize in the liquidation of Pink?

Under 332, Wren will not recognize any gain/loss on the liquidation.

c) What basis will Wren have in the marketable securities and unimproved land it receives
in the liquidation?

The basis of $530,000 will be carried forward.

d) What happen to Pink's earnings and profits and net operating loss carryover?

Under 381, the E&P and the net operating loss carryover will be aquired by Wren.
Basis $530,000

E&P $560,000
Net operating loss carryover $45,000