During the current year, ecru corporation is liquidated and distributes its only asset, land, to kena, the sole shareholder. on the date of the distribution, the land has a basis of $250,000, a fair market value of $650,000, and is subject to a liability of $500,000. kena, who takes the land subject to the liability, has a basis of $120,000 in the ecru stock. with respect to the distribution of the land, which of the following is correct?

a. kena recognizes a gain of $530,000
b. ecru corporation recognizes a gain of $250,000

The correct option is that Kena will recognize the gain amounts to $30,000

Explanation:

Computing the value of basis of land is as follows:

Value of basis of land = Fair market value - Liability

where

Fair market value amounts to $650,000

Liability amounts to $500,000

Putting the values above:

= $650,000 - $500,000

= $150,000

And the basis in stock amounts to $120,000

So, the gain would be:

Gain = Value of basis of land - Basis in stock

= $150,000 - $120,000

= $30,000

Note: Correct option is missing in the question, so providing direct answer.

the answer is risk management planning

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30