Son, Inc., and Clef, Inc., are both taxable domestic C corporations. Using the information in the exhibits, enter either the correct amount or holding period (in number of months) for each item below. For each item, enter the appropriate amounts in the associated cells. If the amount is zero, enter a zero (0).
Question for Amount
January 1, 2019 Balances The following balances are as of January 1, 2019 Party # of Clef Shares Owned Basis in Clef Shares Son, Inc. $200,000 Dawn* 200 $50,000 Clef, Inc. *Dawn owned none of the outstanding shares of Son. Accumulated Earnings and Profits 800 $10,000 Fair Market Value of Assets Fair Market Value as of August 31, 2019, immediately before the distribution Asset Fair Market Value Building $550,000 Computer 25,000 Piano 15,000 Keyboard 3,000 Adjusted Basis Adjusted Basis as of August 31, 2019, immediately before the distribution Asset Clef's Adjusted Basis Date of Purchase Building* $250,000 August 31, 2015 Computer 30,000 August 31, 2015 Piano 10,000 August 31, 2015 Keyboard 4,000 August 31, 2015 *Subject to a $175,000 mortgage. Clef has claimed allowable depreciation on the building using the straight-line method. Letter of Liquidation August 31, 2019 Dear Shareholders, It is with sadness that I announce that we will have finished the complete liquidation of Clef, Inc., later today. After sustaining unexpected hardships over the past few months, we were finally able to pay all of our liabilities to our third party creditors on July 4 earlier this year. Today, the continued unexpected adversity has officially won the war, and we will be locking our doors for the last time this evening. The details of the liquidation have been finalized, and the following distributions will occur before the end of today: Son will receive a building and a computer. Dawn will receive a concert grand piano, an electronic keyboard, and $82,000 in cash. After these distributions have been made, Clef will have no other assets other than an amount reserved for taxes. Thank you both for your dedication and perseverance to Clef; we could not have operated for this long if it was not for the two of you. The rest of us here at Clef wish you nothing but the best in both of your respective future endeavors. Sincerely, George Casio, CEO Highlight X Remove Highlight 1. Loss recognized by Clef, Inc., on the distribution of the computer 2. Gain recognized by Clef, Inc., on the distribution of the concert piano 3. Son, Inc.'s basis in the building 4. Son, Inc.'s basis in the computer 5. Dawn's gain or loss recognized on the distribution of the piano, keyboard, and cash 6. Dawn's holding period for the piano on December 31, 2019 January 1, 2019 Balances The following balances are as of January 1, 2019 Party # of Clef Shares Owned Basis in Clef Shares Son, Inc. $200,000 Dawn* 200 $50,000 Clef, Inc. *Dawn owned none of the outstanding shares of Son. Accumulated Earnings and Profits 800 $10,000 Fair Market Value of Assets Fair Market Value as of August 31, 2019, immediately before the distribution Asset Fair Market Value Building $550,000 Computer 25,000 Piano 15,000 Keyboard 3,000 Adjusted Basis Adjusted Basis as of August 31, 2019, immediately before the distribution Asset Clef's Adjusted Basis Date of Purchase Building* $250,000 August 31, 2015 Computer 30,000 August 31, 2015 Piano 10,000 August 31, 2015 Keyboard 4,000 August 31, 2015 *Subject to a $175,000 mortgage. Clef has claimed allowable depreciation on the building using the straight-line method. Letter of Liquidation August 31, 2019 Dear Shareholders, It is with sadness that I announce that we will have finished the complete liquidation of Clef, Inc., later today. After sustaining unexpected hardships over the past few months, we were finally able to pay all of our liabilities to our third party creditors on July 4 earlier this year. Today, the continued unexpected adversity has officially won the war, and we will be locking our doors for the last time this evening. The details of the liquidation have been finalized, and the following distributions will occur before the end of today: Son will receive a building and a computer. Dawn will receive a concert grand piano, an electronic keyboard, and $82,000 in cash. After these distributions have been made, Clef will have no other assets other than an amount reserved for taxes. Thank you both for your dedication and perseverance to Clef; we could not have operated for this long if it was not for the two of you. The rest of us here at Clef wish you nothing but the best in both of your respective future endeavors. Sincerely, George Casio, CEO Highlight X Remove Highlight 1. Loss recognized by Clef, Inc., on the distribution of the computer 2. Gain recognized by Clef, Inc., on the distribution of the concert piano 3. Son, Inc.'s basis in the building 4. Son, Inc.'s basis in the computer 5. Dawn's gain or loss recognized on the distribution of the piano, keyboard, and cash 6. Dawn's holding period for the piano on December 31, 2019
