Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock.Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000.Under a plan of complete liquidation,Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000.Ball and Jack's recognized gains on the liquidation are:

Question

Quizplus · Accepted Answer

Ball's recognized gain = FMV of property received - basis in Net stock
= $800,000 - $200,000
= $600,000

Jack's recognized gain = FMV of property received - basis in Net stock
= $200,000 - $100,000
= $100,000

Therefore, the total recognized gain is $600,000 + $100,000 = $700,000, which is option B.

Ball Corporation Owns 80% of Net Corporation's Stock and Jack