Brendan and Jisoo are shareholders in BJ, Inc., which has elected to be taxed as a C-corp. Brendan and Jisoo each own a 50% interest in BJ, Inc. Brendan’s basis in his stock is $38,000. Jisoo’s basis in her stock is $70,000. On December 31, 2022 BJ, Inc. owned the following assets:

JB’s Basis Fair Market Value

Cash $ 37,000 $ 37,000

Equipment 110,000 115,000

Patent 22,000 138,000

In complete liquidation, BJ, Inc. distributes the Equipment plus $30,000 in cash to Brendan and the Patent plus $7,000 in cash to Jisoo.

 Required

(1). How much gain or loss, if any, is Brendan required to recognize as a result of his receipt of the Equipment and Cash?

(2). How much gain or loss, if any, is Jisoo required to recognize as a result of her receipt of the Patent and Cash?

(3). What is Brendan’s basis in the Equipment he receives from the liquidation?

Answer rating: 100% (QA)

1 Brendans share of the total distribution is 70000 37000 cash 330... View the full answer