Jalen transferred his 10 percent interest to Wolverine Company as part of a complete liquidation of the company. In the exchange, he received land with a fair market value of $100,000. Jalen's basis in the Wolverine stock was $50,000. The land had a basis to Wolverine Company of $80,000. What amount of gain does Jalen recognize in the exchange and what is his basis in the land he receives?
A)$50,000 gain recognized and a basis in the land of $100,000
B)$50,000 gain recognized and a basis in the land of $80,000
C)No gain recognized and a basis in the land of $80,000
D)No gain recognized and a basis in the land of $50,000

Question

Quizplus · Accepted Answer

Jalen recognizes a gain of $50,000, which is the difference between the fair market value of the land ($100,000) and his basis in the Wolverine stock ($50,000). His basis in the land received is its fair market value, $100,000.

Jalen Transferred His 10 Percent Interest to Wolverine Company as Part