1. Compare the tax consequences to the shareholder and the distributing corporation of the following three kinds of corporate distributions: ordinary dividends, stock redemptions, and complete liquidations. 2. Explain the circumstances in which a liquidating corporation does not recognize gain and/or loss when making a liquidating distribution. 3. Kelly Corporation makes a liquidating distribution. Among other property, it distributes land subject to a mortgage. The mortgage amount exceeds both the adjusted basis and FMV for the land. Explain to Kelly Corporations president how the amount of its recognized gain or loss on the distribution and the shareholders basis for the land are determined. 4. Shareholder Gain or Loss Calculation. For seven years, Monaco Corporation has been owned entirely by Stacy and Monique, who are husband and wife. Stacy and Monique have a $165,000 basis in their jointly owned Monaco stock. The Monaco stock is Sec. 1244 stock. They receive the following assets in liquidation of their corporation: accounts receivable, $25,000 FMV; a car, $16,000 FMV; office furniture, $6,000 FMV; and $5,000 cash. a)What are the amount and character of their gain or loss? b)How would your answer change if the accounts receivable instead had a $140,000 FMV? c)What is the Monacos basis for each property received in the liquidation in Parts a and b? 5. Gain or Loss on Making a Liquidating Distribution. What are the amount and character of the gain or loss recognized by the distributing corporation when making liquidating distributions in the following situations? What is the shareholders basis for the property received? In any situation where a loss is disallowed, indicate what changes would be necessary to improve the tax consequences of the transaction. a. Best Corporation distributes land having a $200,000 FMV and a $90,000 adjusted basis to Tanya, its sole shareholder. The land, a capital asset, is subject to a $40,000 mortgage, which Tanya assumes. b. Wilkins Corporation distributes depreciable property to its two equal shareholders. Robert receives a milling machine having a $50,000 adjusted basis and a $75,000 FMV. The corporation claimed $30,000 depreciation on the machine. The corporation purchased the milling machine from an unrelated seller four years ago. Sharon receives an automobile that originally cost $40,000 two years earlier and has a $26,000 FMV. The corporation claimed $25,000 depreciation on the automobile. c. Jordan Corporation distributes marketable securities having a $100,000 FMV and a $175,000 adjusted basis to Brad, a 66.67% shareholder. Jordan purchased the marketable securities three years ago. Jordan distributes $50,000 cash to Ann, a 33.33% shareholder. d. Assume the same facts as in Part c except the securities and cash are instead each distributed two-thirds to Brad and one-third to Ann