The stock in Black Corporation is owned entirely by Nancy (80%) and Wanda (20%), mother and daughter. Three years ago, Nancy contributed land (basis of $200,000, fair market value of $250,000) to Black Corporation in a transaction that qualified under § 351. In the current year and pursuant to a complete liquidation of Black, the land is distributed proportionately to Nancy and Wanda. At the time of the liquidating distribution, the land had a fair market value of $100,000. What amount of loss will Black Corporation recognize on the distribution of the land?
A) $20,000.
B) $80,000.
C) $100,000.
D) $150,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Under IRC § 336, a corporation recognizes no loss on the distribution of property in complete liquidation to related parties if the distribution is not pro-rata or if the property is disqualified property. Since the land was contributed by Nancy and is being distributed to her and her daughter, Black Corporation cannot recognize a loss on the distribution.

The Stock in Black Corporation Is Owned Entirely by Nancy