Fernando was a one-third shareholder in Rodriguez, Inc.prior to its liquidation in March.Fernando's basis in his Rodriguez stock was $50,000.In March, Rodriguez distributed property worth $125,000 (basis $80,000) in complete liquidation of Fernando's Rodriguez shares.Fernando took the property subject to a $30,000 liability.How much taxable gain must Fernando recognize upon receipt of the property from Rodriguez?

Question

Quizplus · Accepted Answer

Fernando must recognize a taxable gain of $45,000, calculated as the fair market value of the property received ($125,000) minus his basis in the Rodriguez stock ($50,000), and the liability does not affect the calculation of the gain recognized.

Fernando Was a One-Third Shareholder in Rodriguez, Inc