Whaler Corporation Makes a Liquidating Distribution of Land with a $70,000

question 116

Essay

Whaler Corporation makes a liquidating distribution of land with a $70,000 adjusted basis and a $100,000 FMV to shareholder Horton,who surrenders his Whaler stock (adjusted basis $60,000)to the corporation.Alice,another shareholder,receives $100,000 cash for her shares ($115,000 adjusted basis).What are the tax consequences to both Horton and Alice and what is Horton's basis in the land?

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Definitions:

Current Liabilities

Current liabilities are a company's debts or obligations that are due within one year.

Free Cash Flow

A financial metric that represents the amount of cash generated by a company after accounting for capital expenditures, essential for evaluating its liquidity, flexibility, and overall financial health.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating expenses, from its total revenues.

Operating Costs

Expenses associated with the day-to-day operations of a business, including rent, utilities, payroll, and materials.