Billie transferred her 20 percent interest to Jean Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Billie's basis in the Jean stock was $100,000. The land had a basis to Jean Company of $400,000. What amount of loss does Jean recognize in the exchange and what is Billie's basis in the land she receives

Question

Business

Karma

21 May, 21:39

Billie transferred her 20 percent interest to Jean Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Billie's basis in the Jean stock was $100,000. The land had a basis to Jean Company of $400,000. What amount of loss does Jean recognize in the exchange and what is Billie's basis in the land she receives

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Answers (1)

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Ayaan Warner · Answer 1

A) $200,000 loss recognized by Jean and a basis in the land of $200,000 to Billie

Explanation:

The computation is shown below:

For loss recognized, the amount would be

= Land basis - fair value of land

= $400,000 - $200,000

= $200,000

And, the basis in the land should be equal to the fair value of the land i. e $200,000

Hence, the correct option is A

By dividing the fair value from the land basis we can get the loss recognized