A C Corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $300,000. The corporation has a $50,000 liability on the assets, which the shareholder assumes. What is the gain recognized by the corporation?

Under IRC §336, a liquidating corporation recognizes gain or loss as if the property were sold to the distributee at its fair market value. Gain = $300,000 (FMV) - $100,000 (Basis) = $200,000. The liability assumption affects the shareholder's basis/gain, not the corporation's gain (unless liability > FMV).