Greg, a cash method of accounting taxpayer, owns 100 shares of Parker Corporation stock with a basis of $20,000. Greg receives two liquidating distributions of $8,000 on March 3 of last year, and $8,000 on August 8 of this year. The amount of the second distribution is not known until June 15 of this year. Greg recognizes

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The liquidating distributions reduce the basis in the stock. Therefore, after the first distribution of $8,000, Greg's basis in the stock is reduced to $12,000. When the second distribution of $8,000 is received in August, this reduces the remaining basis to zero and the excess $4,000 is treated as a capital loss. Since Greg is a cash method taxpayer, the loss is recognized in the year of the distribution. Therefore, there is no loss recognized in the year of the first distribution, but there is a $4,000 loss recognized in the year of the second distribution.

Greg, a Cash Method of Accounting Taxpayer, Owns 100 Shares