phillips owns 75% of Hampton Corporation stock in which he has a $ 225000 adjusted basis. Consider the following situations

For each situation, what amount of gain/loss will

PhillipPhillip

report in the current year? In the next year?

a.

PhillipPhillip

is a cash method of accounting taxpayer.

HamptonHampton

determines on December 24 of the current year that it will make a

$ 300 comma 000$300,000

liquidating distribution to

PhillipPhillip.

HamptonHampton

pays the liquidating distribution on

FebruaryFebruary

88

of the next year.

b.

Assume the same facts as in Part a except that

PhillipPhillip

is an accrual method of accounting taxpayer.

Compute the gain or loss that

PhillipPhillip

will report for each situation in the current year and in the next year. Begin with situation a., then, complete the table for situation b. (If the shareholder does not have a gain or loss for a year, leave the box empty; do not enter a zero.)

	Gain / (loss)
	Current year	Next year
a.

b.