Casey Corporation has three assets when it decides to liquidate: The corporation sells the stock for its fair market value and distributes the other two assets to its sole shareholder.What is its tax liability on its final tax return if it had $45,000 of income from operations prior to liquidating?

Question

Casey Corporation has three assets when it decides to liquidate:  The corporation sells the stock for its fair market value and distributes the other two assets to its sole shareholder.What is its tax liability on its final tax return if it had $45,000 of income from operations prior to liquidating?

Quizplus · Accepted Answer

$45,000 ordinary income + $50,000 Sec.1245 recapture - $70,000 Sec.1231 loss = $25,000 x .15 = $3,750; the $20,000 capital loss is not deductible.

Casey Corporation Has Three Assets When It Decides to Liquidate