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Part $1$

Explain the$$ IRS's position regarding whether a liquidation transaction will be considered open or closed.

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Part $1$

A$.$

The IRS prefers the closed transaction method where a gain or loss is determined upon the sale of the assets to obtain an accurate FMV at the date of sale. The open transaction method may be used only if a$$ shareholder's petition to the IRS is$$ approved, which is allowed if the liquidation is from a controlled subsidiary corporation.$$

B$.$

The IRS prefers the open transaction method where a gain or loss is determined based on the FMV of the property distributed on the distribution date. The closed transaction method may be used only in unusual$$ circumstances, or if the FMV is not ascertainable.

C$.$

The IRS prefers the open transaction method when a gain will be the end result for the shareholder since a gain will result in ordinary income. However the IRS prefers the closed$$ transaction, when the liquidating distribution is a$$ "large" amount since the shareholder cannot claim the basis of stock against the distribution it receives.

D$.$

The IRS prefers the closed transaction method where a gain or loss is determined based on the FMV of the property distributed on the distribution$$ date, and the FMV amount becomes the$$ property's basis. The open transaction method may be used only in unusual$$ circumstances, or if the FMV is not ascertainable.