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:

Competitive

A trait or situation where individuals or entities strive against each other to achieve a goal or superiority.

Type B Personality Style

A personality pattern in which a person is more relaxed, less aggressive, and less concerned about time.

Relaxed

A physical and mental state characterized by reduced tension and anxiety.

Aggressive

Refers to a range of behaviors that can result in both physical and psychological harm to oneself, others, or objects in the environment.