Question

Cameron Corp. distributes cash and property to its shareholders (all non-corporate) pro rata in a complete liquidation. The value of the property was $40,000 and Cameron's basis was $10,000. What is the amount of gain or loss recognized by Cameron Corp. on the liquidation?

Answer 1

Cameron Corp. will recognize a gain of $30,000 on the liquidation, calculated as the difference between the property's fair market value of $40,000 and its basis of $10,000.

Step-by-step explanation:

The amount of gain recognized by Cameron Corp. on the liquidation, where the property distributed had a value of $40,000 and Cameron's basis in the property was $10,000, would be the difference between the fair market value and the corporation's basis in the property. Therefore, Cameron Corp. would recognize a gain of $30,000 ($40,000 fair market value minus $10,000 basis).