Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packard received land with a fair market value of $380,000. Packard's basis in the State stock was $740,000. The land had a basis to State Company of $562,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives

No loss recognized by State and a basis in the land of $562,000 to Packard.

Explanation:

Given that:

Percentage amount transferred by Packard Corporation = 100%

In exchange ;

Packard received land with a fair market value of $380,000

Packard's basis in the State stock was $740,000

The land had a basis to State Company of $562,000

We are to determine What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives.

Since there is complete  liquidation of the state's company.

The state will not recognize any amount of loss due to the fact that the complete liquidation is tax-deferred to Packard Corporation.

Similarly, Packard's basis in the land is equal to State's basis in the land.

Thus;

In present case, The  State Company has basis of $562000;  Hence; $562000 is the basis in the land for Packard's.