Bill, Bob, Sue and Jane decided for form a corporation, Big Bubbas Brewing Company, each will end up with 2,500 shares. Each individual gave the following: Bill gave $150,000 in cash and brewing equipment with a FMV of $50,000 and his basis was $10,000. Bob gave a building and land with a FMV of $350,000, his basis in the property was $60,000 and the property had a loan of $150,000. Sue gave a food truck with a FMV of $60,000, her basis in the truck was $100,000. In addition, she gave $10,000 of legal services. Last, she contributed accounts receivable with a FMV of $130,000, she was a cash basis taxpayer. Last, Jane gave additional brewing equipment with a FMV of $300,000, her basis was $25,000 and the equipment had a loan of $100,000. In Year 2, the company had earnings and profits from Year 1 and Year 2 of $560,000. The company paid out a distribution of $300,000, pro-rata to the shareholders in cash. Please advise the tax ramifications to the corporation and shareholders. I am looking for an in-depth understanding, including the ability to explain using code sections, court cases and other primary authority as necessary. In Year 2, the company had earnings and profits from Year 1 and Year 2 of $560,000. The company paid out a distribution of $300,000, pro-rata to the shareholders in cash. Please advise the tax ramifications to the corporation and shareholders. The same shareholders as above, with the same basis in their shares as above for the use in this problem In Year 3.

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The company has no earnings and profits but paid out a distribution of 100000 prorata to ... View the full answer