Shepherd Corporation had earnings and profits of $500,000 before distributions. Due to economic conditions, Shepherd, in partial liquidation, distributed land having an adjusted basis of $67,500 and a fair market value of $75,000 to Ms. Rinnie for 95% of her interest in Shepherd. Ms. Rinnie's adjusted basis in the stock at the time of the distribution was $90,000. What is the amount of Shepherd Corporation's recognized gain or loss?

Question

Business

Irvin Day

27 September, 20:25

Shepherd Corporation had earnings and profits of $500,000 before distributions. Due to economic conditions, Shepherd, in partial liquidation, distributed land having an adjusted basis of $67,500 and a fair market value of $75,000 to Ms. Rinnie for 95% of her interest in Shepherd. Ms. Rinnie's adjusted basis in the stock at the time of the distribution was $90,000. What is the amount of Shepherd Corporation's recognized gain or loss?

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Answers (1)

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Esperanza Terrell · Answer 1

amount recognized gain = $7500

Explanation:

given data

profits = $500,000

basis = $67,500

fair market value = $75,000

interest = 95%

distribution = $90,000

to find out

amount of Shepherd Corporation's recognized gain or loss

solution

we know that here effect of non liquidating distributions on corporation is gain are recognised on property that is express as

amount recognized = fair market value - Basis ... 1

put here value we get

amount recognized = $75,000 - $67,500

amount recognized gain = $7500