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

question 11

Multiple Choice

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

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Definitions:

Principal Debtor

The main party obligated to repay a loan or debt.

Parol Evidence Rule

A legal principle that prevents parties from using oral or extrinsic evidence to contradict, vary, or add to the terms of a written contract.

Subsequent Agreements

Agreements made after the initial agreement, which may modify or affirm the conditions of the first.

Integrated Contract

A contract in which multiple documents or agreements are combined and considered to be parts of a single binding agreement.