Question

Dexer Corporation is owned 70% by Amy and 30% by Brad. Dexer Corporation owns Eagle Corporation stock with a $50,000 adjusted basis and a $30,000 FMV. The stock is not disqualified property. As part of a complete liquidation, the Eagle Corporation stock is distributed to Amy. Amy's basis in her Dexer stock is $40,000. Dexer Corporation will recognize:_______________.
A) no loss.
B) a $10,000 loss.
C) a $20,000 loss.
D) none of the above

Answer 1

Answer:

C) $20000 loss

Explanation:

Total Loss on Eagle Corporation stock = $30000 – $50000 = $20000.

As Amy's basis in her Dexer stock is $40,000 out of $50000 that is 80%. Thus 20% loss will be recognized by Dexer Corporation.

$20000 x 20 / 100 = $4000.