The stock in Brown Corporation is owned by Ralph and Rachel, who are unrelated. Ralph owns 80% of the stock and Rachel owns 20% of the stock. Brown had the following assets, held for at least 10 years, which were to be distributed in complete liquidation of Brown per its liquidation plan: Adjusted Basis FMV IBM Stock $50,000 $150,000 Inventory 100,000 150,000 Building 500,000 300,000 Ralph has a basis in his Brown stock of $80,000. Rachel has a basis in her Brown stock of $20,000. a. What are the realized and recognized gains and losses to Brown Corporation if the assets are distributed pro rata to Ralph and Rachel? b. What are the realized and recognized gains and losses to Brown Corporation if the stock and inventory are distributed to Rachel and the building is distributed Ralph? c. What are the tax consequences to Brown if the building had been contributed to the corporation only one year ago when its FMV was $400,000 and the distribution of the building was pro rata? What is Brown's realized and recognized loss? d. What gain or loss do Ralph and Rachel recognize on the liquidation if the liquidation is pro rata?

Answer rating: 100% (QA)

Lets go through each part of the question a Pro Rata Distribution to Ralph and Rachel Realized GainL... View the full answer