Prime Corporation Liquidates Its 85%-Owned Subsidiary Bass Corporation Under the Provisions

question 17

Multiple Choice

Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs. 332 and 337. Bass Corporation distributes land to its minority shareholder, John, who owns a 15% interest. The property received by John has a $55,000 FMV. The land was used in the Bass Corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability, which is assumed by John. John's basis in his stock is $25,000. What gain or loss will John and Bass Corporation recognize on the distribution of the land?

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Definitions:

Acquittal

A legal judgment that a person is not guilty of the crime with which they have been charged.

Representativeness Heuristic

A cognitive shortcut that involves making judgments about the probability of an event under uncertainty, based on how much it resembles available prototypes.

Death Penalty

A legal punishment where an individual is put to death by the state as a penalty for a crime.

Representativeness Heuristic

A mental shortcut used when making judgments about the probability of an event under uncertainty, based on how similar it is to our stereotypes of similar occurrences.