Charlene and Dennis Each Own 50% of Brewster Corporation and Have

question 29

Essay

Charlene and Dennis each own 50% of Brewster Corporation and have owned it for five years. The adjusted bases of their Brewster stock are $80,000 and $40,000 respectively. Brewster Corporation liquidates and distributes $60,000 to Charlene in exchange for her stock. It distributes a parcel of land with a $140,000 FMV which is subject to a $90,000 mortgage to Dennis in exchange for his stock. Dennis assumes the mortgage and also receives $10,000 in cash.
a)What is the character and amount of each shareholder's gain or loss?
b)What is each shareholder's basis in the property received in the liquidation?

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Definitions:

Trail Of Tears

Cherokees’ own term for their forced removal, 1838–1839, from the Southeast to Indian lands (later Oklahoma); of 15,000 forced to march, 4,000 died on the way.

Seminole Indians

A Native American tribe originally from Florida, known for its resistance against U.S. military campaigns.

Florida

A southeastern U.S. state known for its beaches, theme parks, and as a popular destination for retirees.