Final answer:
Shareholders treat liquidating distributions as full payment for their transferred stock, which may lead to a taxable gain or loss depending on their cost basis. This is not always a fully taxable transaction and any liabilities assumed may affect the overall tax calculation.
Step-by-step explanation:
When shareholders receive liquidating distributions, they need to address the tax implications of the distribution. The correct response to the question is option (b), which states that shareholders treat the property received as full payment for the transferred stock. This means that they have to calculate their taxable gain or loss based on the difference between the liquidating distribution and their original cost basis in the stock. It's not necessarily a fully taxable transaction, as it depends on the cost basis and the amount received. Additionally, the amount realized may need to be reduced by any liabilities assumed from the corporation, but this does not affect the liquidating distributions directly, rather it is part of the overall transaction's calculation.