Heather, an individual, owns all of the outstanding stock in Silver Corporation. Heather purchased her stock in

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Heather, an individual, owns all of the outstanding stock in Silver Corporation. Heather purchased her stock in Silver nine years ago, and her basis is $56,000. At the beginning of this year, the corporation has $76,000 of accumulated E & P and no current E & P (before considering the effect of the distributions as noted below). What are the tax consequences to Heather (amount and type of income and basis in property received) and Silver Corporation (gain or loss and effect on E & P) in each of the following situations?
a. Silver distributes land to Heather. The land was held as an investment and has a fair market value of $54,000 and an adjusted basis of $42,000.
b. Assume that Silver has no current or accumulated E & P prior to the distribution. How would your answer to (a) change?
c. Assume that the land distributed in (a) is subject to a $46,000 mortgage (which Heather assumes). How would your answer change?
d. Assume that the land has a fair market value of $54,000 and an adjusted basis of $62,000 on the date of the distribution. How would your answer to (a) change?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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South Western Federal Taxation 2018 Essentials Of Taxation Individuals And Business Entities

ISBN: 9781337386173

21st Edition

Authors: William A. Raabe, James C. Young, Annette Nellen, David M. Maloney

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