Question

Question 19 0/2 points 1. On January 1, 2002, Ashley Corporation distributed $1231 land with a market value of $300,000 and an adjusted basis of $205,000 pursuant to a plan qualifying for a complete redemption under the $302(b)(3). The distribution was made to individual shareholder C who had owned 40% of Ashley since it was founded. C's sister owns the remaining 60 percent. C's stock Interest redeemed had a basis of $140,000, What is the amount and the character of any gain or loss that Ashley should recognize on the distribution? $160,000 $1231 gain $ 95,000 $1231 gain $ 95,000 capital gain $ 65,000 $1231 loss $300,000 dividend

$95,000 capital gain is NOT the correct answer.

Answer 1

Answer is $65,000 1231 loss as under the code 302(b)(3) the complete termination of the shareholder's interest in the corporation is done. so the gain of ashley would be $65,000(205,000-140,000)