Haruki and Bob have owned and operated SOA as a C corporation for a number of years.

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Haruki and Bob have owned and operated SOA as a C corporation for a number of years. When they formed the entity, Haruki and Bob each contributed $100,000 to SOA. Each has a current basis of $100,000 in his SOA ownership interest. Information on SOA’s assets at the end of year 5 is as follows (SOA does not have any liabilities):

At the end of year 5, SOA liquidated and distributed half of the land and building, half of the inventory, and half of the cash remaining after paying taxes (if any) to each owner. Assume that, excluding the effects of the liquidating distribution, SOA’s taxable income for year 5 is $0.
a) What are the amount and character of gain or loss SOA will recognize on the liquidating distribution?
b) What are the amount and character of gain or loss Haruki will recognize when he receives the liquidating distribution of cash and property? Recall that his stock basis is $100,000 and he is treated as having sold his stock for the liquidation proceeds.

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Taxation Of Individuals And Business Entities 2023 Edition

ISBN: 9781265790295

14th Edition

Authors: Brian Spilker, Benjamin Ayers, John Barrick, Troy Lewis, John Robinson, Connie Weaver, Ronald Worsham

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