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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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  1. 27 September, 23:18
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    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
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