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Category: Tax
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Experience:  CPA with tax experience.
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In 2009, pursuant to a plan of complete liquidation, Woods

Resolved Question:

In 2009, pursuant to a plan of complete liquidation, Woods Corp. distributed all of its property to its shareholders. Among the property distributed was cash of $200,000, and land that had been held as an investment that had a basis of $100,000, and a fair market value of $160,000. The land was subject to a mortgage of $170,000 which the shareholders assumed. What amount of gain must Woods Corp. recognize as a result of its liquidating distributions?

a. $0
b. $10,000
c. $60,000
d. $70,000
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hi Customer,

Thanks for your question. The answer is:

d. $70,000
The mortgage of $170,000 exceeds the property’s FMV of $160,000, so the amount of
the mortgage must be used to determine the amount of recognized gain. $170,000 mortgage - $100,000 basis = $70,000 gain.

Hope this helps!
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