Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. Gary's basis in the Key stock (a capital asset) surrendered is $120,000. If Gary relies on the open transaction doctrine, at the liquidation date he must recognize a

Question

Quizplus · Accepted Answer

According to the open transaction doctrine, the gain or loss on property received in a complete liquidation of a corporation is not recognized until the property is disposed of in a taxable transaction. Therefore, Gary will not recognize any gain or loss on the distribution of the patent, cash, and land until he sells them. Thus, the answer is D, $0 gain.

Key Corporation Distributes a Patent with an Indeterminable Value to Gary