Pursuant to a complete liquidation,Oriole Corporation distributes to its shareholders land with a basis of $600,000 and a fair market value of $750,000.The land is subject to a liability of $800,000.What is Oriole's recognized gain or loss on the distribution?

Question

Quizplus · Accepted Answer

Section 336 provides that a liquidating corporation recognizes gain or loss on the distribution of property in complete liquidation.When property distributed in a complete liquidation is subject to a liability of the liquidating corporation,the fair market value of the property cannot be less than the amount of the liability.Thus,Oriole recognizes a gain of $200,000 [$800,000 (liability)- $600,000 (land basis)].

Pursuant to a Complete Liquidation,Oriole Corporation Distributes to Its Shareholders