Macedona Corporation distributes Land (Adjusted Basis of $60,000 and Fair Market Value of $120,000) as a...

Macedona Corporation distributes Land (Adjusted Basis of $60,000 and Fair Market Value of $120,000) as a Property Dividend to its shareholders. The Land is subject to a liability of $160,000. As a result of this distribution, Macedona Corporation must Recognized Gain of:

$0
$100,000
$60,000
$40,000

Solutions

Expert Solution

Macedone Corporation can recognize a gain of $ 40,000 because the fair market value of the land was only $1,20,000 . However, the liability attached to the land was of $1,60,000. Therefore, while giving the land as a dividend it has also settled the liability worth $1,60,000.

Thus, net gain amounted to $1,60,000 - $1,20,000= $40,000

ekkarill92 answered 2 years ago

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