After a Plan of Complete Liquidation Has Been Adopted, Condor

Multiple Choice

After a plan of complete liquidation has been adopted, Condor Corporation sells its only asset, land (basis of $220,000) , to Eduardo (an unrelated party) for $300,000. Under the terms of the sale, Condor Corporation receives cash of $50,000 and Eduardo's notes for the balance of $250,000. The notes are payable over the next five years ($50,000 per year) and carry an appropriate interest rate. Immediately after the sale, Condor Corporation distributes the cash and notes to Maria, the sole shareholder of Condor Corporation. Maria has a basis of $30,000 in the Condor stock. The installment notes have a value equal to their face amount. If Maria wishes to defer as much gain as possible on the transaction, which of the following is correct?

A) Maria recognizes a gain of $20,000 in the year of liquidation.
B) Maria recognizes a gain of $45,000 in the year of liquidation.
C) Maria recognizes a gain of $270,000 in the year of liquidation.
D) Condor Corporation recognizes no gain or loss on the distribution of the installment notes.
E) None of the above.