Titan Corporation adopts a plan of liquidation. It distributes an apartment building having a $3 million FMV

Question:

Titan adopts a plan of liquidation. It distributes an apartment building having a $3 million FMV and a $1.8 million adjusted basis, and land having a $1 million FMV and a $600,000 adjusted basis, to MNO in exchange for all the outstanding Titan stock. MNO has an $800,000 basis in its Titan stock. Titan has claimed $600,000 of MACRS depreciation on the building. MNO agrees to assume the $3 million mortgage on the land and building. All of Titan’s assets other than the building and land are used to pay its federal income tax liability.
a. What are the amount and character of Titan’s recognized gain or loss on the distribution?
b. What are the amount and character of MNO Partnership’s gain or loss on the liquidation? What is its basis for the land and building?
c. How would your answer to Parts a and b change if the mortgage instead was $4.5 million?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...