Last Year, Crow Corporation Acquired Land in a Transaction That

question 5

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 distributes 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 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 the above

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Definitions:

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty and may affect the outcome of a legal agreement.

Express Warranty

Any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of a contract.

Non-Material Term

A clause in a contract that, if breached, does not substantially affect the contract's overall purpose and outcome.

Uniform Commercial Code

An exhaustive compilation of statutes that control all business dealings across the United States.