The tax basis of property received by a noncorporate shareholder in a complete liquidating will be the property's fair market value.

Question

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When a noncorporate shareholder receives property in a complete liquidation, their tax basis in the property received is the fair market value of the property. This is because in a complete liquidation, the shareholder is treated as if they sold their stock back to the corporation in exchange for the property received. The amount of the deemed sale proceeds is equal to the fair market value of the property, so the shareholder's tax basis in the property is also equal to its fair market value.

The Tax Basis of Property Received by a Noncorporate Shareholder