Carly Owns 25% of Base Corporation's Single Class of Stock

question 46

Multiple Choice

Carly owns 25% of Base Corporation's single class of stock and Premier Corporation owns the remaining 75%. Carly's basis in the Base stock is $200,000 and Premier Corporation's basis in the Base stock is $600,000. Carly receives property with a $175,000 adjusted basis and a $250,000 FMV and Premier Corporation receives property with a $600,000 adjusted basis and a $750,000 FMV in complete liquidation of Base Corporation. All of Base's cash is used to pay its liabilities. Which of following statements is correct concerning the tax effects of the liquidation?

• A)Neither Carly nor Premier Corporation will recognize a gain.
• B)Carly will recognize some gain but Premier Corporation will not recognize any gain.
• C)Both Carly and Premier will recognize some gain.
• D)Carly will not recognize any gain but Premier will recognize some gain.

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Definitions:

Physiological

Relating to the branch of biology that deals with the normal functions of living organisms and their parts.

Esteem

The regard in which an individual or entity is held by others, often reflecting respect, admiration, or importance.

Cognitive Component

Part of an attitude that consists of a person's knowledge and perception of the attributes of an object or concept.

Altering

The process of making changes to something, often to tailor or modify it to fit a particular need or requirement.