During 2017, Track Corporation distributes property to Cindy as part of a complete liquidation. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis. The first payment to Cindy of $8,000 for use of the copyrighted property occurs in 2018. Cindy has a basis in the Track stock of $95,000 immediately preceding the liquidation. The minimum amount of gain that Cindy must recognize is a
A)$3,000 gain in 2018.
B)$0 gain in 2017.
C)$3,000 gain in 2017, which is reported on an amended current-year tax return that is filed in 2018.
D)none of the above

Question

Quizplus · Accepted Answer

In a complete liquidation, the shareholder recognizes gain or loss equal to the difference between the fair market value (FMV) of the assets received and the basis in the liquidated corporation's stock. Cindy received $30,000 in cash, land with a $60,000 FMV, and a copyright with an $8,000 payment received in 2018. The total FMV of the assets received in 2017 is $90,000 ($30,000 + $60,000), which is less than her basis in the Track stock of $95,000, resulting in no gain recognized in 2017. The payment for the use of the copyrighted property in 2018 does not affect the gain calculation for the liquidation in 2017.

During 2017, Track Corporation Distributes Property to Cindy as Part