An S Corp has no C Corp earnings and profits. It owns land with a basis of $3,000 and a fair market value of $10,000. There are two equal shareholder R and G. R receives a cash distribution of $10,000 and G receives the land.

a) Does the distribution cause the S Corp to recognize gain on the distribution?
b) If the answer to a) is yes, who is taxed on the gain?
c) What is the basis of the land in G’s hands?
d) Assume G’s basis in the shares prior to the distribution was $5,000. What is G’s basis in the shares at the beginning of the next year?

Answer rating: 100% (QA)

a Yes the distribution causes the S Corp to recognize gain on the di... View the full answer