A Corporation Distributes Land and the Related Liability in a Nonliquidating

Multiple Choice

A corporation distributes land and the related liability in a nonliquidating distribution to a shareholder. The land (a capital asset) has an adjusted basis of $70,000, an FMV of $100,000 and is subject to a mortgage of $120,000. The corporation must recognize

A) a $20,000 capital loss.
B) a $50,000 capital gain.
C) a $70,000 capital gain.
D) no gain or loss.