A corporation generally will recognize gain or loss on a liquidating distribution of installment notes to its shareholders.

Question

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When a corporation makes a liquidating distribution of installment notes to its shareholders, it will generally recognize a gain or loss. The amount of gain or loss recognized is based on the fair market value of the installment notes compared to the corporation's adjusted basis in the notes. This gain or loss is then reported on the corporation's tax return.

A Corporation Generally Will Recognize Gain or Loss on a Liquidating