The Stock in Toucan Corporation Is Held Equally by Two

question 34

Multiple Choice

The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transfer property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property?

• A) $0
• B) $20,000
• C) $160,000
• D) $180,000
• E) None of the above

---

Definitions:

Behavioral Economists

Scholars who study the psychological, social, cognitive, and emotional factors affecting the economic decisions of individuals and institutions.

Status Quo Bias

The tendency most people have when making choices to select any option that is presented as the default (status quo) option. Explainable by prospect theory and loss aversion.

Anchoring

A cognitive bias in decision-making where individuals rely too heavily on an initial piece of information (the "anchor") when making judgments.

Minimum Payments

The smallest amount of a debt that must be paid each period, often used in the context of credit card debt or loans to avoid penalties.