Prime Corporation Liquidates Its 85%-Owned Subsidiary Bass Corporation Under the Provisions

Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs.332 and 337.Bass Corporation distributes land to its minority shareholder,John,who owns a 15% interest.The property received by John has a $55,000 FMV.The land was used in the Bass Corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability,which is assumed by John.John's basis in his stock is $25,000.What gain or loss will John and Bass Corporation recognize on the distribution of the land?

A) $$\begin{array} { | l | l | } \hline \text { John } & \text { Bass } \\\hline \$ 20,000 \text { gain } & \$ 0 \\\hline\end{array}$$
B) $$\begin{array} {| l | l | } \hline\text { John } & \text { Bass } \\\hline \$ 20,000 \text { gain } & \$ 10,000 \text { loss } \\\hline\end{array}$$
C) $$\begin{array} {| l | l | } \hline\text { John } & \text { Bass } \\\hline \$ 30,000 \text { gain } & \$ 0 \\\hline\end{array}$$
D) $$\begin{array} {| l | l | } \hline\text { John } & \text { Bass } \\\hline \$ 30,000 \text { gain } & \$ 10,000 \text { loss } \\\hline\end{array}$$

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