Question
Mary and Jane, unrelated taxpayers, hold Gray Corporations stock equally. One year before the complete liquidation of Gray, Mary transfers land (basis of $600,000, fair
Mary and Jane, unrelated taxpayers, hold Gray Corporations stock equally. One year before the complete liquidation of Gray, Mary transfers land (basis of $600,000, fair market value of $180,000) to Gray Corporation as a contribution to capital. In liquidation, Gray distributes the land to Jane. At the time of the liquidation, the land is worth $150,000.
a. | How much loss may Gray Corporation recognize on the distribution of the land to Jane? |
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b. | Assume that the transfer of land to Gray Corporation was made so that the corporation could subdivide the land and build residential housing. However, a subsequent deterioration of the housing market forced Gray Corporation to abandon its plans. What amount of loss may Gray Corporation recognize on the distribution of the land to Jane? |
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