In the current year,Dove Corporation (E & P of $1 million)distributes all of its property in a complete liquidation.Alexandra,a shareholder,receives land having a fair market value of $300,000.Dove Corporation had purchased the land as an investment three years ago for $375,000,and the land was distributed subject to a $270,000 liability.Alexandra took the land subject to the $270,000 liability.What is Alexandra's basis in the land?
A)$375,000.
B)$300,000.
C)$270,000.
D)$30,000.
E)None of the above.

Question

Quizplus · Accepted Answer

When a shareholder receives property in a complete liquidation, their basis in the property received is the fair market value of the property on the distribution date. In this case, Alexandra received land with a fair market value of $300,000, so her basis in the land is $300,000. The fact that the land was originally purchased for $375,000 and was distributed subject to a $270,000 liability is irrelevant to determining Alexandra's basis in the land.

In the Current Year,Dove Corporation (E & P of $1