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Finch Corporation (E & P of $400,000) Distributed Machinery ($10,000

question 68

Essay

Finch Corporation (E & P of $400,000) distributed machinery ($10,000 adjusted basis, $150,000 fair market value) to its sole shareholder, Kathleen. The property is subject to a $50,000 mortgage, which Kathleen assumed. How much dividend income does Kathleen recognize as a result of the distribution and what is her basis in the machinery?


Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds.

Debt/Equity Ratio

A financial metric showing the balance between the amount of equity provided by shareholders and the debt incurred to support a company's assets.

Cost of Borrowing

The total expense incurred by an entity for borrowing funds, including interest payments, fees, and other charges.

Book Value Per Share

A financial measure that represents a per share assessment of the minimum value of a company's equity.

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