Question

The built-in loss limitation in a complete liquidation does not apply to losses attributable to a decline in a property's fair market after its transfer to the corporation

A. True
B. False

Answer 1

The built-in loss limitation in a complete liquidation does not apply to losses attributable to a decline in a property's fair market after its transfer to the corporation.

Step-by-step explanation:

The statement is true. The built-in loss limitation in a complete liquidation does not apply to losses attributable to a decline in a property's fair market after its transfer to the corporation.

When a property is transferred to a corporation, the basis of the property in the hands of the corporation is generally the fair market value of the property on the date of transfer. If the property's value declines after the transfer, any subsequent losses are not subject to the built-in loss limitation.

For example, if a property is transferred to a corporation with a fair market value of $100,000, but its value declines to $70,000 after the transfer, any losses attributable to the decline in value below $70,000 would not be subject to the built-in loss limitation.