A corporation distributes land and the related liability in a nonliquidating distribution to a shareholder. The land (a capital asset) has an adjusted basis of $70,000, an FMV of $100,000 and is subject to a mortgage of $120,000. The corporation must recognize

Question

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The corporation recognizes a gain to the extent the liability ($120,000) exceeds the adjusted basis of the land ($70,000), resulting in a $50,000 capital gain.

A Corporation Distributes Land and the Related Liability in a Nonliquidating