Final answer:
A liquidating corporation cannot recognize losses on property distributed to related parties, as per tax regulations to prevent tax evasion and artificial deductions.
Step-by-step explanation:
A liquidating corporation will NOT recognize losses if loss property is distributed to a related party during the liquidation. The tax code specifically prohibits the recognition of losses on property distributed to related individuals or entities, primarily to prevent the manipulation of deductions and the realization of artificial losses. Therefore, such losses are disallowed in order to maintain the integrity of the tax system and ensure fairness among taxpayers.