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15 September, 07:59

Calamity Corp. distributes five unimproved parcels of swampland to its shareholders as part of a complete liquidation. The fair market value of each parcel is $25,000 and Calamity's adjusted basis in each parcel is $40,000. What amount of gain or loss will Calamity Corp. recognize as a result of distributing the parcels?

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  1. 15 September, 10:19
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    -$75,000

    Explanation:

    We simply substract the adjusted basis value from the market value

    Adjusted value = $40,000 x 5

    = $200,000

    Fair Maket Value = $25,000 x 5

    = $125,000

    Calamity Corp. gain/loss = $125,000 - $200,000

    = - $75,000

    Therefore, Calamity Corp will recognize a loss of $75,000 as a result of distributing the parcels.
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