The Stock of Brown Corporation (E & P of $680,000)is

question 19

Multiple Choice

The stock of Brown Corporation (E & P of $680,000) is owned as follows: 95% by Black Corporation (basis of $380,000) ,and 5% by Susanna (basis of $20,000) .Both shareholders purchased their shares in Brown five years ago.In the current year,Brown Corporation liquidates and distributes land (fair market value of $950,000,basis of $550,000) to Black Corporation,and securities (fair market value of $50,000,basis of $35,000) to Susanna.Which of the following statements is incorrect with respect to the tax consequences resulting from these distributions?

• A)Susanna recognizes a $30,000 gain and has a $35,000 basis in the securities.
• B)Brown recognizes no gain on the distribution of the land.
• C)Black recognizes no gain and has a $550,000 basis in the land.
• D)Brown recognizes a $15,000 gain on the distribution of the securities.
• E)None of the above.

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Definitions:

Ethene

A colorless flammable gas with a faint sweet and musky odor, the simplest alkene with the chemical formula C2H4, used as a petrochemical precursor.

Constitutional Isomers

Compounds that have the same molecular formula but differ in the connectivity of their atoms, resulting in different chemical structures.

Geometric Isomers

Molecules with the same structural formula but differing in the spatial arrangements of atoms or groups of atoms, due to restricted rotation around a bond.

Alkenes

Hydrocarbons containing at least one carbon-carbon double bond, part of the unsaturated hydrocarbons.