Question
Several years ago, Ms. Barb Barn transferred four sports cars, with a $245,000 total fair market value, to a corporation, in return for all of
Several years ago, Ms. Barb Barn transferred four sports cars, with a $245,000 total fair market value, to a corporation, in return for all of the shares of the company. The cars were used for display purposes only and were not expensed/written off by the company. During the current year, all of the cars were destroyed in a fire on Ms. Barb Barn's estate. Unfortunately, the company did not insure the sports cars and, as a consequence, no compensation was available for the loss. The corporation had no assets other than the cars; therefore, there was no reason for Ms. Barb Barn to continue to hold the shares. Consequently, she sold the shares for $500 to a friend who needed a corporate shell for some business operations. Ms. Barb Barn used the $122,250 allowable capital loss [1/2 ($245,000 - $500)] to offset her taxable capital gains arising from real estate transactions.
is this treatment correct with justification
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started