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?
Shareholder Black Castle
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.