1. Barnett Corporation owns an office building that cost $900,000. Barnett has taken $700,000 of depreciation on the building. The property is subject to a $600,000 mortgage. The office building has a current FMV of $400,000. Barnett Corporation is liquidated and the office building is distributed to its sole shareholder--a single individual. The shareholder assumes the mortgage. Barnett Corporation must recognize

1. no gain or loss.
2. a $100,000 gain.
3. a $400,000 gain. ?
4. a $100,000 loss.
5. None of these.

2. At the formation of the B&D Partnership, Betty contributes land with a basis of $10,000 and a fair market value of $30,000 and Di contributes cash of $30,000. Betty and Di share profits and losses equally. When the land is sold two years later for $50,000, Betty must recognize a gain of

1. $10,000.
2. $20,000.
3. $30,000.
4. $40,000.
5. None of these.

3. Jorge has a 20% interest in the XY partnership. In the current year, the partnership has sales of $3,400,000, cost of goods sold of $2,300,000, and $300,000 in operating expenses. Jorge withdrew $100,000 from the partnership during the year, but his partner did not withdraw anything.

1. Jorge must report $160,000 gross income from the partnership for the year.
2. The partnership is taxable on $800,000 for the year and Jorge must include $50,000 in gross income.
3. Jorge is not required to recognize any income from the partnership for the year.
4. Jorge must report $100,000 gross income from the partnership for the year.
5. None of these.

4. Which of the following statements about stock ownership is incorrect?

1. A C corporation can own stock of an S corporation.
2. An S corporation can own stock of a C corporation.
3. A tax-exempt charity can own stock of an S corporation.
4. An S corporation can own stock of a Qualified Subchapter S Subsidiary.
5. None of these.