An S Corporation has four shareholders. The Corporation has land with a fair market value of $100,000
Question:
An S Corporation has four shareholders. The Corporation has land with a fair market value of $100,000 and a basis of $20,000. The corporation distributes the land in-kind to the four shareholders. Each shareholders' basis in the corporation is $1,000. Assume the corporation has always been an S. Assume also that the AAA balance prior to the property distribution is zero.
New assumption: same facts as above, except the corporation has accumulated E&P of $16,000
a. Each shareholder has a gain of $20,000
b. Each shareholder has a dividend of $4,000
c. Each shareholder has a gain of $20,000 and a dividend of $4,000
d. Each shareholder has no gain or loss until the property is sold.
e. None of the above.
Which one is the right answer and why?
Fundamentals of Taxation 2015
ISBN: 9781259293092
8th edition
Authors: Ana Cruz, Michael Deschamps, Frederick Niswander, Debra Prendergast, Dan Schisler, Jinhee Trone