Riverwalk Corporation, a C Corp, distributes all of its property in a complete l

Question

Riverwalk Corporation, a C Corp, distributes all of its property in a complete liquidation. Juan receives equipment having a $43,000 FMV, $35,000 adjusted basis to Riverwalk (original cost to Riverwalk of $55,000, with $20,000 MACRS depreciation taken) in exchange for all of his shares (basis $25,000, held for 5 years).

What is the amount and character of income recognized by Riverwalk as a result of this distribution?

$12,000 ordinary loss.

$8,000 1231 gain.

$18,000 1231 gain.

$8,000 ordinary income.

$12,000 ordinary loss.

$8,000 1231 gain.

$18,000 1231 gain.

$8,000 ordinary income.

Explanation / Answer

juan has equity in riverwalk valued $25000

but riverwalk tansfered an equipment to juan which has fmv of 43000 and adusted value of $35000

but the equipment shall be valued at FMV $43000

gain ti riverwalk=$43000-$25000=$18000

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