Grackle Corporation (E & P of $900,000)distributes cash of $100,000 and land (fair market value of $500,000;basis of $410,000)to a shareholder in a qualifying stock redemption.The land distributed is subject to a mortgage of $550,000.Grackle will recognize a gain of $140,000 as a result of the distribution.

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Grackle Corporation will recognize a gain of $140,000, which is the difference between the fair market value of the land ($500,000) and its basis ($410,000), as the mortgage exceeds the fair market value, the gain is limited to the difference between the fair market value and the basis.

Grackle Corporation (E & P of $900,000)distributes Cash of $100,000