The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transfer property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property?
A) $0
B) $20,000
C) $160,000
D) $180,000
E) None of the above

Question

Quizplus · Accepted Answer

Since there is no change in ownership percentage of the property during the time Toucan Corporation held it, there is no gain or loss recognized on the contribution to capital or distribution of the property. Therefore, the answer is $0.

The Stock in Toucan Corporation Is Held Equally by Two