A Corporation Distributes Land and the Related Liability in a Nonliquidating

question 42

Multiple Choice

A corporation distributes land and the related liability in a nonliquidating distribution to a shareholder. The land (a capital asset) has an adjusted basis of $70,000, an FMV of $100,000 and is subject to a mortgage of $120,000. The corporation must recognize

• A) a $70,000 capital gain.
• B) no gain or loss.
• C) a $20,000 capital loss.
• D) a $50,000 capital gain.

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Definitions:

Ambiguity

Ambiguity is the quality of being open to more than one interpretation, lacking clarity, and leading to uncertainty or confusion.

Unpredictability

The extent to which events or behaviors cannot be anticipated due to a lack of consistent patterns or information.

Same Culture

The shared beliefs, practices, norms, and values among members of the same community or society.

Same Values

The shared principles or standards of behavior considered important within a group, organization, or culture.