For three years, Pearl Corporation has been owned equally by Andrea and Billy. Andrea and Billy have $42,000 and $26,500 adjusted bases, respectively, in their Pearl stock. Andrea receives a $34,000 cash liquidating distribution in exchange for her Pearl stock. Billy receives as a liquidating distribution a parcel of land having a $56,000 FMV and subject to a $35,000 mortgage, which he assumes, and $13,000 of cash in exchange for his Pearl stock.

Requirements

a. What are the amount and character of each shareholder's gain or loss?

b. What is each shareholder's basis for the property received in the liquidation?