When a C Corporation dissolves, the fair market value of the property distributed to shareholders is the basis for distribution. The distribution is typically treated by shareholders as a way to trade their stock, and the basis of the property received is equal to its FMV. If the corporation divides assets over multiple years, shareholders may not see any profit until the FMV of the property they receive surpasses their aggregate stock basis. Losses are not recognized until the final distribution. To illustrate your comprehension of how to calculate the basis of a liquidated C-Corporation, here is an example.

Mr. L has a stake in 100 shares of stock in W-Corporation. The following assets were distributed to shareholder L by W-Corporation in full liquidation and distribution over the year:

• Cash $25,000
• The FMV of the land is $450,000 and the mortgage is $200,000.

Below is a description of how to calculate the shareholder's L for a complete liquidation of Corporation-W which is $225,000.

$450,000 + $25,000 - $200,000-$50,000 =$225,000