Z Corporation, in complete liquidation, distributes its only asset, land, to its sole shareholder.The land has a basis of $40,000 and a fair market value of $55,000.The shareholder assumed Z's liability of $60,000.Z Corporation will report gain on the distribution of
A)$0
B)$15,000
C)$20,000
D)$60,000

Question

Quizplus · Accepted Answer

Z Corporation will report a gain of $20,000, calculated as the fair market value of the land ($55,000) minus the basis of the land ($40,000), plus the liability assumed by the shareholder ($60,000) minus the fair market value of the land ($55,000). This results in a gain of $20,000.

Z Corporation, in Complete Liquidation, Distributes Its Only Asset, Land