Problem $20-27($LO$.1)$

Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land held for three years as an investment $($adjusted basis of $\backslash (\backslash$$ $250,000\backslash ),$ fair market value of $\backslash (\backslash$$ $490,000\backslash )).$ The land is subject to a liability of $\backslash (\backslash$$ $520,000\backslash ).$

a$.$ Oriole Corporation would recognize $!$

$\backslash (\backslash$checkmark $\backslash )$ of $\backslash ($ q $\backslash )$ on the distribution.

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A complete liquidation, like a qualifying stock redemption, produces sale or exchange treatment to the shareholder. However, the ta$>$ of a liquidation to the corporation vary somewhat from those of a redemption. Sale or exchange treatment is the general rule for the liquidating corporation, although some losses are disallowed.

b$.$ If the land is$,$ instead, subject to a liability of $\backslash (\backslash$$ $400,000\backslash ),$ Oriole Corporation has a recognized long$-$term capital gain $\backslash (\backslash$checkmark $\backslash )$ of

$\backslash$$ on the distribution.