Mary and Jane, unrelated taxpayers, hold Gray Corporationâsstock 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. Inliquidation, Gray distributes the land to Jane. At the time of theliquidation, the land is worth $150,000.
a.
How much loss may Gray Corporation recognize on the distributionof the land to Jane?
b.
Assume that the transfer of land to Gray Corporation was made sothat the corporation could subdivide the land and build residentialhousing. However, a subsequent deterioration of the housing marketforced Gray Corporation to abandon its plans. What amount of lossmay Gray Corporation recognize on the distribution of the land toJane?
Mary and Jane, unrelated taxpayers, hold Gray Corporationâsstock 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. Inliquidation, Gray distributes the land to Jane. At the time of theliquidation, the land is worth $150,000.
a. | How much loss may Gray Corporation recognize on the distributionof the land to Jane? |
b. | Assume that the transfer of land to Gray Corporation was made sothat the corporation could subdivide the land and build residentialhousing. However, a subsequent deterioration of the housing marketforced Gray Corporation to abandon its plans. What amount of lossmay Gray Corporation recognize on the distribution of the land toJane? |
