Dusty Corporation owns 90% of Palace Corporation's stock and Susan owns the remaining stock. Dusty Corporation's stock basis is $300,000 and Susan's stock basis is $20,000. Under a plan of complete liquidation, Dusty Corporation receives property with a $400,000 adjusted basis and a $540,000 FMV and Susan receives property with a $20,000 adjusted basis and a $60,000 FMV. The bases of the properties are:

Question

Quizplus · Accepted Answer

- Dusty Corporation's share of the property is $540,000 x 90% = $486,000
- Susan's share of the property is $540,000 x 10% = $54,000
- Dusty Corporation's new basis in the property is ($486,000 ÷ $540,000) x $400,000 = $356,000
- Susan's new basis in the property is ($54,000 ÷ $60,000) x $20,000 = $18,000
Therefore, the correct answer is C.

Dusty Corporation Owns 90% of Palace Corporation's Stock and Susan