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

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Definitions:

Stocks and Bonds

Securities representing equity ownership in a corporation (stocks) and debt obligations of an entity (bonds), each offering different risk and return profiles.

Securities and Exchange Commission (SEC)

A U.S. government agency responsible for regulating the securities markets and protecting investors.

Supervises

To oversee and direct tasks, operations, or people to ensure objectives are met effectively and efficiently.

Trading of Securities

The act of buying, selling, or exchanging financial instruments such as stocks, bonds, and options in the financial markets.