Prime corporation liquidates its 85% owned subsidiary bass corporation under the provisions of secs. 332 and 337. bass corporation distributes land to its minority shareholder, john, who owns a 15% interest. the property received by john has a $55,000 fmv. the land was used in the bass corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability, which is assumed by john. john's basis in his stock is $25,000. what gain or loss will john and bass corporation recognize on the distribution of the land?

$20000 gain for John Corporation and $10000 loss for Bass Corporation.

Explanation:

John Corporation gain(loss) = FMV of property - Liability assumed - Stock basis

                                               = 55000-10000-25000

                                               = 20000

Bass Corporation gain/loss = 55000-65000

                                              = - 10000

Therefore,  $20000 gain for John Corporation and $10000 loss for Bass Corporation.

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return