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1) a) The following is a balance sheet of X corporation just prior to its complete liquidation Cash 15,000 Accts Receiv 10,000 Equipment 5,000 Land

1)
a) The following is a balance sheet of X corporation just prior to its complete liquidation
Cash 15,000
Accts Receiv 10,000
Equipment 5,000
Land 45,000
Total 75,000

Accts payable 18,000
Mortgage payable 30,000
Capital stock 20,000
Earned surplus 7,000
Total 75,000
The fair market value of the land is 100,000 all other property is worth book value. A owns all the X stock, which he acquired for 20,000 several years ago. Disregarding the effect of any corporate level income tax otherwise resulting per Section 336, how much gain will a recognize upon complete liquidation of X

a. 62,000 long term capital gain
b. 7,000 long term capital gain
c. 55,000 long term capital gain
d. 75,000 long term capital gain
e. none of the above

b) Assume that X corporation’s adjusted basis in each of its assets is equal to book value. Assume that fair market value of the land is 100,000 and for all other assets is equal to book value. How much gain is recognized by X corporation pursuant to Section 336 on account of the liquidation
a. 55,000
b. None
c. 27,000
d. 82,000

c) Assume that X corporation also distributed a patent royalty contract to A which contract does not have an ascertainable fair market value. Disregarding the effect of Section 336, how much gain is recognized by A from the liquidation in the year of liquidation?
a. none because the liquidation is open
b. 62,000 long term capital gain
c. none of the above
d) Assume that A reported the liquidation as open and received a 50,000 royalty payment in the third year following the liquidation. How much income is recognized by A with respect to this payment
a. 50,000 ordinary income
b. 50,000 long term capital gain
c. 30,000 ordinary income
d. none of the above

e) under that fact of question (a) above, what are the tax consequences to A of his payment in a later year of a 10,000 state income tax deficiency imposed on X referable to the year of liquidation?
a. 10,000 ordinary loss
b. 10,000 long-term capital loss
c. A must file an amended return for the year of liquidation reducing the amount of his gain from liquidation
d. none of the above

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A. The fair market value of the land is 100,000 all other property is worth book value. A
owns all the X stock, which he acquired for 20,000 several years ago. Disregarding the
effect of any...

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