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    Corporate Distributions in Complete Liquidations

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    Black Castle Inc. adopts a plan of complete liquidation and distributes a truck worth $15,000 with an original basis of $25,000 and an adjusted basis of $7,000 to a 40 percent shareholder with a stock basis of $3,000. The shareholder subsequently claims $4,000 of depreciation on the truck, and later sells it for $13,000.
    a. What is the shareholder's gain, including its character, upon receipt of the truck? Black Castle's gain?
    b. What are the shareholder's and Black Castle's gains upon the truck's subsequent sale?

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    Requirement A
    Shareholder Black Castle
    Stock ...

    Solution Summary

    This solution shows step-by-step calculations to determine the shareholder's and Black Castle's gain upon receipt of the truck as well as gains upon sale of the truck.