On April 7,2009,Crow Corporation acquired land in a transaction that qualified under § 351.The land had a basis of $480,000 to the contributing shareholder and a fair market value of $350,000.Assume that the shareholder also transferred equipment (basis of $50,000,fair market value of $200,000)in the same § 351 exchange.Crow Corporation adopted a plan of liquidation on October 6,2010.On December 8,2010,Crow Corporation distributes the land to Ali,a shareholder who owns 20% of the stock in Crow Corporation.The land's fair market value was $300,000 on the date of the distribution to Ali.Crow Corporation acquired the land to use as security for a loan it had hoped to obtain from a local bank.In negotiating with the bank for a loan,the bank required the additional capital investment as a condition of its making a loan to Crow Corporation.How much loss can Crow Corporation recognize on the distribution of the land?
A)$0.
B)$50,000.
C)$180,000.
D)$230,000.
E)None of the above.

Question

Quizplus · Accepted Answer

According to §336(d)(1), the amount of any loss recognized on a distribution of property in complete liquidation of a corporation shall not exceed the shareholder's adjusted basis of such property.

In this case, the shareholder received the land with a fair market value of $300,000 and a contributing shareholder's basis of $480,000, resulting in a built-in loss of $180,000. However, Crow Corporation cannot recognize this loss because the distribution of the land to Ali is a non-liquidating distribution.

Therefore, the correct answer is C) $180,000, as there is built-in loss but no loss recognized.

On April 7,2009,Crow Corporation Acquired Land in a Transaction That