Reference no: EM133031110

Questions -

Q1. The adjusted Gross estate of the estate of Mercedes, a decreased person, is $3,000,000. Mercedes estate will incur death taxes and funeral and administrative expenses of $500,000. Mercedes' gross estate includes eighty percent (80%) of the stock of Cynthia corporation. Mercedes purchased the stock in Cynthia corporation eight (8) years ago for $300,000 and the value of the stock on the date of Mercedes death was $1,000,000. The executer of Mercedes estate redeemed $1,000,000 of the stock in Cynthia corporation. As a result of this Redemption, Mercedes estate has taxable dividend income of: (Assume that Mercedes estate does not qualify for any redemption under section 302(b) and that Cynthia corporation has substantial earnings and profit.

A) $4000,000

B) $1,000,000

C) $500,000

D) $0

Q2. Koblenz Corporation acquired land in a section 351 transfer in 2018. The land had an adjusted basis of $600,000 and a Fair Market Value of $550,000 on the date of the transfer. Koblenz corporation has two (2) shareholders, Mainz and Baden, who are not related to each other. Mainz owns sixty percent (60%) of the stock of Koblenz corporation and Baden owns forty percent (40%) of the stock of Koblenz corporation. Koblenz corporation adopts a plan of complete liquidation in 2020. At the time of distribution of the land pursuant to the liquidation plan, the land had decreased in the value to $4000,000. Koblenz corporation distributes the land to Mainz. What amount loss may Koblenz corporation recognize on the distribution of the land to Mainz.

A) $200,000

B) $150,000

C) $50,000

D) $0