Pearl owns 60 percent of Gorman Corp.'s stock. During 2015, Pearl contributed property with an adjusted basis of $20,000 and a fair market value of $15,000 to Gorman Corp. in a transaction qualifying under Code Sec. 351. During the current year, Gorman adopted a plan of complete liquidation and distributed this same property back to Pearl. At the time of distribution the property had an adjusted basis of $15,000 and a fair market value of $7,000.

a. How much loss will be recognized by Gorman Corp. as a result of the liquidating distribution?

b. How will your answer to Part

a. change if Gorman Corp. makes a proportionate liquidating distribution of the property with a 60 percent interest in the property to Pearl?