Alabama Corporation, an S corporation, liquidates this year by distributing a parcel of land to its sole shareholder Mark Ingram. The fair market value of the parcel is $50,000 and its tax basis is $30,000. Mark's basis in his stock is $25,000.
a. What amount of gain or loss, if any, does Alabama Corporation recognize on the distribution?
b. How much gain must Mark recognize (if any) as a result of the distribution and what is his basis in the land?
c. What is your answer to (a) if the fair market value of the land is $20,000 rather than $50,000?
d. What is your answer to (b) if the fair market value of the land is $20,000 rather than $50,000?