On May 15 of the current year, Quick Corporation distributes

On May 15 of the current year, Quick Corporation distributes to its shareholder Calvin a building having a $250,000 FMV and used in Quick’s business. The building originally cost $180,000. Quick claimed $30,000 of straight-line depreciation, so that the adjusted basis of the building on the date of distribution for taxable income purposes is $150,000. The adjusted basis of the building for E&P purposes is $160,000. The building is subject to an $80,000 mortgage, which Calvin assumes. Quick has an E&P balance exceeding the amount distributed and is subject to a 34% marginal tax rate.
a. What are the amount and character of the income Calvin recognizes as a result of the distribution?
b.
What is Calvin’s basis in the building?
c. What are the amount and character of Quick’s gain or loss as a result of the distribution?
d.
What effect does the distribution have on Quick’s E&P?
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...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...