Pursuant to a complete liquidation in the current year, Fuchsia Corporation distributes to Carey land (basis of $425,000, fair market value of $390,000) that was purchased three years ago and held as an investment. The land is subject to a liability of $250,000. Carey, who owned 35% of the Fuchsia shares outstanding, had a basis of $60,000 in the stock.
· What are the tax consequences of the liquidating distribution to Fuchsia Corporation?
· What are the tax consequences of the liquidating distribution to Carey?
· What basis will Carey have in the land after the liquidating distribution?