Shrike Corporation Is Liquidated and Its Assets Are Distributed to Its

question 119

Multiple Choice

Shrike Corporation is liquidated and its assets are distributed to its 10 equal and unrelated individual shareholders.The assets distributed are as follows: One of the tax consequences of the liquidating distribution is:

• A) No gain or loss is recognized by Shrike Corporation.
• B) Shrike Corporation will recognize no loss on the securities, but must recognize a gain of $100,000 on the land.
• C) The shareholders will have a basis of $1,000,000 in the property they receive.
• D) The shareholders will have a basis of $1,100,000 in the property they receive.
• E) None of the above.

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Definitions:

Sales Salaries Expense

The total cost incurred for salaries, wages, and commissions paid to sales personnel, reflecting a company's investment in its sales force.

Work in Process

Inventory consisting of items that are in the process of being produced but are not yet finished goods.

Direct Materials Cost

The cost of raw materials directly used in the production of goods, easily traceable to the final product.

Work in Process

Inventory consisting of items that are in the production process but are not yet completed.