Madeleine owns 100% of Omega Corporation's common stock. Omega is an accrual basis,

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 Madeleine owns 100% of Omega Corporation's common stock. Omega is an accrual basis, calendar year corporation. Madeleine formed the corporation six years ago by transferring $200,000 of cash in exchange for the Omega stock. Thus, she has held the stock for six years and has a $200,000 adjusted basis in the stock.

Omega's balance sheet at January 1 of the current year is as follows:



the icon to view the balance sheet.)

Omega has held the marketable securities for two years.

In addition, Omega has claimed $110,000 of MACRS depreciation on the machinery and $160,000

of straight-line depreciation on the building. On January 2 of the current year, Omega liquidates and distributes all property to Madeleine except that Omega retains cash to pay the accounts payable and any tax liability resulting from Omega's liquidation. Assume that Omega has no other taxable income or loss.


Determine the tax consequences to Omega and Madeleine. Assume a 34% corporate tax rate.

Let's begin by determining the tax consequences for Omega. Select the property needed to compute

Omega's total gain or loss, compute the gain or loss for each asset and determine the character for each gain or loss. Then, compute Omega's total gain or loss and compute Omega's tax liability.

Gain or loss recognized

Times: Tax rate
Tax liability
Next, determine the gain or loss for


Select the formula then enter the amounts and compute the gain or loss recognized.

Gain (loss) recognized

Select the property distributed to


and enter her basis for each property received.

Property received