The stock of Kenny Corp. is owned equally by two brothers. During 2013, they transferred land (basis of $300,000; FMV of $320,000) as a contribution to capital to Kenny Corp. During September, 2017, Kenny Corp. adopted a plan of complete liquidation and subsequently made a pro rata distribution of land back to the brothers. At the time of the liquidating distribution, the land had a FMV of $180,000. What amount of loss can be recognized by Kenny Corp. on the distribution of land?

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Business

Ignacio Mcgee

19 February, 04:03

The stock of Kenny Corp. is owned equally by two brothers. During 2013, they transferred land (basis of $300,000; FMV of $320,000) as a contribution to capital to Kenny Corp. During September, 2017, Kenny Corp. adopted a plan of complete liquidation and subsequently made a pro rata distribution of land back to the brothers. At the time of the liquidating distribution, the land had a FMV of $180,000. What amount of loss can be recognized by Kenny Corp. on the distribution of land?

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Krista · Answer 1

long-term capital loss 140,000

Explanation:

the land enter the partnership at 320,000 cost

then it is being liquidate at 180,000

so it will be a capital-loss by 140,000

because it was held for more than two years It will be a long-term capital loss

This amount will be distributed amount the brother shares for profit and losses. Regardless of the fact that one of them contributed the land.