Robin Corporation distributes furniture (basis of $40,000; fair market value of $50,000) as a property dividend to its shareholders. The furniture is subject to a liability of $55,000. Robin Corporation recognizes gain of:
A) $55,000.
B) $15,000.
C) $10,000.
D) $0.
E) None of these.

Question

Quizplus · Accepted Answer

Robin Corporation recognizes a gain of $15,000, which is the excess of the liability ($55,000) over the basis of the property ($40,000).

Robin Corporation Distributes Furniture (Basis of $40,000; Fair Market Value