Amount and character of each shareholders gain or loss

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For three years, Diamond Corporation has been owned equally by Arlene and Billy. Arlene and Billy have $40,000 and $20,000 adjusted bases, respectively, in their Diamond stock. Arlene receives a $30,000 cash liquidating distribution in exchange for her Diamond stock. Billy receives as a liquidating distribution a parcel of land having a $70,000 FMV and subject to a $45,000 mortgage, which he assumes, and $5,000 of cash in exchange for his Diamond stock.

a. What are the amount and character of each shareholder’s gain or loss?

b. What is each shareholder’s basis for the property received in the liquidation?

Reference no: EM13827086

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