During the Current Year, Ecru Corporation Is Liquidated and Distributes

Multiple Choice

During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $300,000, a fair market value of $650,000, and is subject to a liability of $400,000. Kena, who takes the land subject to the liability, has a basis of $75,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?

A) Ecru Corporation recognizes a gain of $100,000.
B) Kena has a basis of $250,000 in the land.
C) Kena recognizes a gain of $175,000.
D) Kena has a basis of $300,000 in the land.
E) Kena recognizes a gain of $575,000.