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The Trap Corporation liquidates. One shareholder, who owned

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30 percent of the stock...
The Trap Corporation liquidates. One shareholder, who owned 30 percent of the stock, receives for the stock, inventory worth $90,000 with a basis of $70,000. Trap Corporation will recognize:

a. $20,000 of capital gain
b. $20,000 of ordinary income
c. $20,000 of Sec. 1231 gain
d. No gain
Submitted: 7 years ago.Category: Tax
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11/2/2010
Tax Professional: JKCPA, CPA replied 7 years ago
JKCPA
JKCPA, CPA
Category: Tax
Satisfied Customers: 5,884
Experience: CPA with tax experience.
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Hi Customer,

Thanks for your question.

b. $20,000 of ordinary income

Inventory is neither a capital nor Sec. 1231 asset, so the gain is ordinary income.

Hope this helps!
JKCPA
JKCPA, CPA
Category: Tax
Satisfied Customers: 5,884
Experience: CPA with tax experience.
Verified
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