The stock of Cooper Corporation is 70% owned by Carole and 30% owned by Carole's brother, Chris. During 2017, Chris transferred property (basis of $100,000 and FMV of $120,000)as a contribution to the capital of Cooper. During February 2018, Cooper adopted a plan of liquidation and subsequently made a pro rata distribution of the property back to Carole and Chris. At the time of the liquidation, the property had an FMV of $80,000. What amount of loss can be recognized by Cooper on the distribution of property?
A)$0
B)$6,000
C)$12,000
D)$20,000

Question

Quizplus · Accepted Answer

Corporations do not recognize a loss on the distribution of property in liquidation to the extent that the property is distributed to a related party. Since Carole and Chris, who own 100% of Cooper Corporation, are related parties (siblings), Cooper cannot recognize any loss on the distribution of the property.

The Stock of Cooper Corporation Is 70% Owned by Carole