Topper Corporation makes a liquidating distribution of land to its sole shareholder Tonya.Topper purchased the land several years ago for $150,000,and the land was recently appraised at $120,000 of value.Tonya purchased her stock three years ago for $65,000.What is the amount of gains or losses recognized by Topper Corporation and Tonya?

Question

Quizplus · Accepted Answer

D) A corporation recognizes gain or loss on assets distributed in liquidation as if the assets had been sold at fair market value so Topper Corporation will recognize a $30,000 loss ($120,000 FMV - $15,000 basis). The shareholder is deemed to have sold her stock for the cash plus FMV of assets received in the liquidation so Tonya will recognize a $55,000 gain on her stock ($120,000 FMV of land received - $65,000 basis of stock).

Topper Corporation Makes a Liquidating Distribution of Land to Its