59. Cartman Corporation owns 90 shares of SP Corporation. The remaining 10 shares are owned by Kenny (an individual). After several years of operations, Cartman decided to liquidate SP Corporation by distributing the assets to Cartman and Kenny. The tax basis of Cartman’s shares is $10,000, and the tax basis of Kenny’s shares is

$7,000. SP reported the following balance sheet at the date of liquidation:

Adjusted Basis FMV Cash $12,000 $ 12,000 Accounts receivable 8,000 8,000 Stock investment 2,000 10,000 Land 40,000 70,000 Total assets $62,000 $100,000 Common stock—Cartman (90%) $ 90,000 Common stock—Kenny (10%) 10,000 Total shareholder equity $100,000

a. Compute the gain or loss recognized by SP, Cartman, and Kenny on a complete liquidation of the corporation, where SP distributes $10,000 of cash to Kenny and the remaining assets to Cartman.

b. Compute the gain or loss recognized by SP, Cartman, and Kenny on a complete liquidation of the corporation, where SP distributes the stock investment to Kenny and the remaining assets to Cartman. Assume that SP’s tax rate is zero.

c. What form needs to be filed with the liquidation of SP?