Pursuant to a Complete Liquidation,Woodpecker Corporation Distributes the Following Assets

question 15

Multiple Choice

Pursuant to a complete liquidation,Woodpecker Corporation distributes the following assets to its unrelated shareholders: land held as an investment (basis of $400,000,fair market value of $250,000) ,inventory (basis of $260,000,fair market value of $290,000) ,and marketable securities (basis of $100,000,fair market value of $160,000) .What are the tax results to Woodpecker Corporation as a result of the liquidation? (Woodpecker Corporation has held the land for six years and the securities for two years.)

• A)Woodpecker Corporation would recognize a gain of $90,000 and a loss of $150,000.
• B)Woodpecker Corporation would recognize a gain of $90,000 and a loss of $0.
• C)Woodpecker Corporation would recognize a gain of $60,000 and a loss of $0.
• D)Woodpecker Corporation would recognize no gain or loss on the liquidation.
• E)None of the above.

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Definitions:

Safeguarding Inventory

Measures and practices employed to prevent inventory loss, damage, or theft, including physical security and inventory management systems.

Financial Statements

Reports that summarize the financial performance and condition of a company, including the balance sheet, income statement, and cash flow statement.

Average cost

The total cost of goods divided by the number of goods, used in inventory valuation and determining profit margins.

Periodic inventory system

A periodic inventory system is a method of inventory valuation where the inventory is updated and cost of goods sold is calculated at the end of a specific accounting period.