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

For Dusty Corporation: 
The property received has a $400,000 adjusted basis, which is equal to its FMV at the time of distribution.
Thus, the basis of property received by Dusty Corporation is $400,000.

For Susan:
The property received has a $20,000 adjusted basis, which is equal to its FMV at the time of distribution.
Thus, the basis of property received by Susan is $20,000.

Since the question asks for the bases of the distributed properties, only option C provides the correct answers.

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