The Stock of Lavender Corporation Is Held as Follows: 80

question 4

Multiple Choice

The stock of Lavender Corporation is held as follows: 80% by Jade Corporation (basis of $400,000) and 20% by Tiffany (basis of $100,000) . Lavender Corporation is liquidated in December of the current year, pursuant to a plan adopted earlier in the year. Pursuant to the liquidation, Lavender Corporation distributed Asset A (basis of $600,000, fair market value of $900,000) to Jade, and Asset B (basis of $250,000, fair market value of $225,000) to Tiffany. No election is made under § 338. With respect to the liquidation of Lavender:

• A) Lavender recognizes a loss of $25,000 on the distribution of Asset B.
• B) Jade has a basis in Asset A of $900,000.
• C) Tiffany has a basis in Asset B of $225,000.
• D) Jade recognizes a gain of $500,000.
• E) Lavender recognizes a gain of $300,000 on the distribution of Asset A.

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Definitions:

Major Purpose

The primary reason or objective behind an action, strategy, or existence of an entity or project.

Strategic Plans

Long-term organizational plans that outline goals, objectives, and actions designed to achieve a competitive advantage and meet stakeholders' expectations.

Financial Plans

Detailed documents that outline an individual's or organization's present financial situation, future goals, and strategies to achieve those goals, including budgeting, investments, and risk management.

Projections

Estimates or forecasts of future financial performance or trends, often based on current data and assumptions.