Key Corporation Distributes a Patent with an Indeterminable Value to Gary

question 62

Multiple Choice

Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. Gary's basis in the Key stock (a capital asset) surrendered is $120,000. If Gary relies on the open transaction doctrine, at the liquidation date he must recognize a

• A)$0 gain.
• B)$10,000 capital loss.
• C)$30,000 capital loss.
• D)$70,000 capital gain.

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Definitions:

Limited

Describes a form of company structure that legally protects its shareholders' liability to the amount of capital they invested.

Consolidation Adjustment Entries

are journal entries made in the preparation of consolidated financial statements to eliminate transactions between entities within the same group, ensuring accurate representation of financials as if the group was a single entity.

Intragroup Transactions

Financial transactions that occur between enterprises under common control, typically within the same corporate group.

Ownership Interest

The legal rights and claims a person or entity has over property or a company, often evidenced by shares or other forms of equity.