Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock last year. Later that same year, Keke sold the pretzel maker for $300. This year, Keke adopted a plan of liquidation. Previously, Keke had never used the pretzel maker in connection with the conduct of its trade or business. The sale was reported on Keke's current tax return. What reporting option does Keke Corporation not have because of its plan of liquidation?
A)File an amended tax return for the tax year in which the tax loss was originally claimed.
B)Recapture the loss on the tax return for the year the plan for liquidation was adopted.
C)Recognize a gain of $100 for the current year.
D)none of the above

Question

Quizplus · Accepted Answer

Keke Corporation cannot recognize a gain of $100 for the current year because the pretzel maker was sold in the previous year, and the gain or loss from that sale would have been reported in that year's tax return.

Toby Made a Capital Contribution of a Pretzel Maker Having