When entities file consolidated income tax returns

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Unformatted text preview: nd ($60,000) is irrelevant for depreciation purposes. CPA-04763 Type1 M/C A-D Corr Ans: D PM#89 R 3-01 70. CPA-04763 Released 2005 Page 43 Aztec, a C corporation, distributed an asset to Burn, a shareholder. The asset had a fair market value of $30,000 and was subject to a $40,000 liability, assumed by Burn. The asset had an adjusted basis of $25,000. What amount of gain must Aztec recognize? a. b. c. d. $0 $5,000 $10,000 $15,000 CPA-04763 Explanation Choice "d" is correct. When a corporation distributes assets to a shareholder, the corporation recognizes a gain as if it had sold the asset. The gain is calculated as follows: Amount Realized - greater of FMV of asset =$30,000 or the amount of liability assumed by the shareholder Less Adjusted basis of property sold Realized and recognized gain $40,000 ($25,000) $15,000 Choices "a", "b", and "c" are incorrect per the above explanation. CPA-05271 Type1 M/C A-D Corr Ans: C PM#104 R 3-01 71. CPA-05271 Released 2006 Page 19 ParentCo, SubOne, and SubTwo have filed consolidated returns since their inception....
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