The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transferred property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property?
A) $0
B) $20,000
C) $160,000
D) $180,000
E) None of the above

Question

Quizplus · Accepted Answer

Toucan Corporation will not recognize any loss on the distribution of the property in a complete liquidation. Under tax rules, corporations do not recognize losses on the distribution of property in complete liquidation to shareholders.

The Stock in Toucan Corporation Is Held Equally by Two