X is the sole shareholder of Z Shipping Corporation.In anticipation of the corporation's liquidation, X in 2008 contributed an ancient wharf to the corporation with a built-in loss of $ 1 million (value $2 million, basis $3 million).In 2012, Z distributed the wharf along with land purchased and held for business purposes by the corporation worth $900,000 (basis $200,000).What is the amount of gain/ loss recognized by Z?
A)$1 million loss, $700,000 gain
B)$700,000 gain
C)$0
D)$1 million loss

Question

Quizplus · Accepted Answer

Z Shipping Corporation recognizes a $700,000 gain on the distribution of the land (value $900,000 - basis $200,000). The built-in loss on the wharf contributed by X is not recognized because losses on property contributed to a corporation by a shareholder are not recognized upon distribution by the corporation to avoid the duplication of loss benefits.

X Is the Sole Shareholder of Z Shipping Corporation