During the current year, Heaton Corporation which properly files a Form 1120 (C-corp) tax return is...

During the current year, Heaton Corporation which properly files a Form 1120 (C-corp) tax return is totally liquidated. Upon liquidation Heaton Corporation distributes its only asset, land to Paul, who is the sole shareholder. On the date of distribution, the land has a basis to Heaton Corporation of $250,000, a fair market value of $650,000, and is subject to a liability of $300,000. Paul, who takes the land subject to the liability, has a basis of $135,000 in his Heaton Corporation stock.

(a) Are there any tax consequences to Heaton Corporation as a result of the liquidation, and if so please describe the tax consequences in detail?

(b) Are there any tax consequences to Paul as a result of the liquidating distribution, and if so please describe the tax consequences to Paul in detail.

(c) What is Paul’s basis in the land following the liquidation.

Expert Solution

ekkarill92 answered 1 year ago

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