Scott and Lynn Brown each own 50% of Benson Corporation stock. During the current year, Benson made the following distributions to its shareholders:

Benson had E&P of $250,000 immediately before the distributions. Prepare a memorandum for your tax manager explaining how Benson should treat these transactions for tax and financial accounting purposes. How will the two shareholders report the distributions? Assume Benson€™s marginal tax rate is 34%. Your manager has suggested that, at a minimum, you consult the following resources:
€¢ IRC Sec. 301
€¢ IRC Sec. 311
€¢ IRC Sec. 312
€¢ Accounting Standards Codification (ASC) 845, formerly APB No. 29

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Shareholder Property Distributed Adjusted Basis to Corporation Property's FMV Scott Brown Land parcel A Lynn Brown Land parcel B S 40,000 S75,000 20,000 75,000