Last Year, Crow Corporation Acquired Land in a Transaction That

question 18

Multiple Choice

Last year, Crow Corporation acquired land in a transaction that qualified under § 351. The land had a basis of $400,000 to the contributing shareholder and a fair market value of $310,000. Assume that the shareholder also transferred equipment (basis of $100,000, fair market value of $200,000) in the same § 351 exchange. In the current year, Crow Corporation adopted a plan of liquidation and distributed the land to Ali, a shareholder who owns 20% of the stock in Crow Corporation. The land's fair market value was $230,000 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 by Crow 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) $80,000
• C) $90,000
• D) $170,000
• E) None of these.

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Definitions:

Partnership Act

A law that governs the rights, responsibilities, and conduct of individuals engaged in a business partnership.

Joint Business Activities

Business operations in which two or more parties work together on a project or business venture sharing profits and losses.

Indigenous Peoples

Ethnic groups considered to be the original inhabitants of a particular region, having distinct cultural, social, and political structures.

Federal Government

The national government of a federated state which has specific powers enumerated by a constitution, distinguishing it from regional or local governments.