K purchased all 100 shares of N Corporation in 2008 for $50,000.N Corporation adopts a plan of liquidation on January 1, 2012.On May 1, 2012, N sells its only asset, land, for $10,000 cash and an installment note with a face amount and fair market value of $90,000.On January 8, 21013, N distributes the cash and note to K.On her 2012 tax return, K will report the following as gain or loss from the liquidation.(Assume no collections on the installment note during 2012)

Question

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K will report a gain of $50,000 from the liquidation in 2012. This is calculated by subtracting the original cost of the shares ($50,000) from the total value received from the liquidation ($100,000, which is the sum of $10,000 in cash and the $90,000 note). The fact that no collections were made on the installment note during 2012 does not affect the gain calculation for the year of distribution.

K Purchased All 100 Shares of N Corporation in 2008