Lake City Corporation owns all the stock in Columbia Corporation. Pursuant to a plan of complete liquidation, Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City. Columbia's gain with respect to the distribution will be

Question

Quizplus · Accepted Answer

Since the distribution is made pursuant to a plan of complete liquidation, it is treated as if the corporation sold all of its assets at FMV. However, since the land's FMV is equal to its basis, there is no gain or loss recognized by the distributing corporation. Therefore, the gain with respect to the distribution is zero.

Lake City Corporation Owns All the Stock in Columbia Corporation