During the Current Year, Ecru Corporation Is Liquidated and Distributes

question 36

Multiple Choice

During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $370,000, a fair market value of $550,000, and is subject to a liability of $450,000. Kena, who takes the land subject to the liability, has a basis of $50,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?

• A)Kena recognizes a gain of $50,000.
• B)Ecru Corporation recognizes a gain of $80,000.
• C)Kena has a basis of $100,000 in the land.
• D)Kena has a basis of $370,000 in the land.
• E)None of the above.

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Definitions:

Core Purpose

The fundamental reason a company exists, beyond just making money, which guides its business decisions and shapes its culture.

Marketing Mix

A set of controllable marketing tools—product, price, place, and promotion—that a company uses to produce a desired response in the target market.

Inbound Logistics

The activities related to receiving, storing, and distributing inputs internally needed for the production of goods or services.

Outbound Logistics

The process involved in moving products from the production facility to the end user or intermediary, such as transportation and warehousing.