Martin corporation acquires two properties from a

Question

Problem

On January 4, 2016, Martin Corporation acquires two properties from a shareholder in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are:

                             Shareholder's                      Basis Fair Market Value    Built-In Gain (Loss)            
Property 1                $300,000                               $375,000                        $ 75,000
Property 2                525,000                                  400,000                         (125,000)
Net built-in loss                                                                                           ($ 50,000)

Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 30% shareholder when the property is worth $350,000.

a. Compute Martin's basis in Property 1 and in Property 2 as of January 4, 2016.

b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2.