In 2005, Ruth transfers land with a FMV of $100,000 and an adjusted basis of $20,000 in exchange for 100% interest in Ruthie, Inc., a C-corporation. The land had a $40,000 mortgage which was assumed by the corporation.

Does Ruth recognize gain, loss, or income from the transfer of the land to Ruthie, Inc.?

What is the basis of Ruth's stock in Ruthie, Inc.?

What basis does Ruthie, Inc. have in the land?

At the end of 2022 (before the Dec. 31 distribution), Ruth has a stock basis of $30,000 and Ruthie, Inc. has a deficit in current E&P of $(2,000) and a deficit in accumulated E&P of ($180,000). On December 31, 2022, the corporation distributes another parcel of land with a fair market value of $90,000 and an adjusted basis of $50,000. Assume that Ruth is in the 37% tax bracket and that she does not have any other capital transactions.

How much tax (if any) does Ruth owe from the distribution of this equipment?

What is Ruth's basis in her Ruthie, Inc. stock following this distribution?

Answer rating: 100% (QA)

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