How much loss may the corporation recognize on distribution

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Problem

Bud and Lou, unrelated taxpayers, own all of Whose On, Inc.'s stock. Bud owns 60% and Lou 40%. One year before the complete liquidation of Whose On, Bud transfers (a) land (basis: $200,000; FMV $130,000) and (b) equipment (basis: $20,000, FMV: $100,000) to Whose On as a contribution to capital. In liquidation, Whose On distributes the land to Lou. At the time of the liquidation, the land is worth $110,000.

a. How much loss, if any, may the corporation recognize on the distribution of the land to Lou?

b. Assume that (1) the transfer of land to the corporation was made so that the corporation build a distribution center but a subsequent deterioration of economic conditions forced the corporation to liquidate and (2) the basis of the equipment at time of contribution was $ 50,000. What amount of loss may the corporation recognize on the distribution of the land to Lou?

Reference no: EM131794299

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