Harmony Corporation is owned equally by Ross and Sylvester. Ross and Sylvester purchased their stock several years ago and have adjusted bases for their Harmony stock of $14,000 and $30,000,

respectively. Each shareholder receives two liquidating distributions. The first liquidating distribution, made in the current year, results in each shareholder receiving a one-half interest in a parcel of land that has a $44,000 FMV and an $19,000 adjusted basis to Harmony Corporation. The second liquidating distribution, made in the next year, results in each shareholder receiving $18,000 in cash.

Requirements

a.

What are the amount and character of Ross and Sylvester's recognized gain or loss for the current year? For the next year?

Gain or Loss recognized Current Year

Shareholder	Amount	Character
Ross
Sylvester

Gain or Loss recognized Next Year

Amount	Character

b.

What is the basis of the land in Ross and Sylvester's hands?

Shareholder	Basis
Ross
Sylvester

c.

How would your answers to Parts a and b change if the land has a $9,000 FMV instead of a $44,000 FMV?

Gain or Loss recognized Current year

Shareholder	Amount	Character
Ross
Sylvester

Gain or Loss recognized Next Year

Amount	Character

What is the basis of the land in Ross and Sylvester's hands if the land has a $9,000 FMV instead of a $44,000 FMV?

Shareholder	Basis
Ross
Sylvester