Stoneman Corporation had the following assets on December 31, 2020:
Basis to Stoneman Corporation Fair Market Value
- Cash…………………………………. $31,000……………………………. $31,000
- Inventory…………………………….. 30,720……………………………. 122,880
- Building and Land………………… 61,440……………………………. 199,680
- Equipment…………………………. 178,176……………………………… 30,720
- Investment stock…………………… 55,296……………………………… 32,000
The inventory was purchased by Stoneman Corporation. The investment stock was acquired from one of the corporation’s shareholders Gary, as a capital contribution on November 15, 2019, when the stock had a fair market value of $36,864 and an adjusted basis of $55,296. The remaining assets were acquired from the shareholders when Stoneman Corporation was formed four years ago. Stoneman Corporation adopts a plan of liquidation on December 31,2020, and will distribute all of its assets on that date to its two unrelated shareholders, Ellen (80 percent of the stock in Stoneman with a stock basis of $168,960), and Gary (20 percent of the stock in Stoneman with a stock basis of $82,944). Structure a liquidation that will minimize the tax liabilities to Stoneman Corporation and it its two shareholders and show all of your computations.
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