After a Complete Liquidation Has Been Adopted,Wren Corporation Sells Its

question 32

Essay

After a complete liquidation has been adopted,Wren Corporation sells its only asset,unimproved land (basis of $200,000) held as an investment.The land is sold to Seth (an unrelated party) for $500,000.Under the terms of the sale,Wren Corporation receives cash of $50,000 and Seth's notes for the balance of $450,000.The notes are payable over the succeeding 5 years ($90,000 per year) and carry an appropriate rate of interest.Immediately after the sale,Wren Corporation distributes the cash and notes to Adam,the sole shareholder of Wren.Adam has an adjusted basis of $80,000 in the Wren stock.The installment notes have a value equal to their face amount of $450,000.
a.How will Wren Corporation be taxed on the distribution?
b.How will Adam be taxed on his receipt of the cash and notes?

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Definitions:

Relative Frequencies

The ratio of the frequency of a particular event to the total number of occurrences or samples.

Frequency Chart

A visual representation of data that shows the frequency or number of occurrences of each possible value of a variable.

Nearest Minute

A measure of time rounded to the closest minute, often used in timing or scheduling contexts.

Maximum Time

The longest duration allowed or recorded for a certain process, event, or activity to be completed.