Butterfield Corporation has two equal shareholders, Maria and Tara. Butterfield Corporation has current E&P of $50,000 and
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Question:
Butterfield Corporation has two equal shareholders, Maria and Tara. Butterfield Corporation has current E&P of $50,000 and a deficit in accumulated E&P of $40,000. On September 15, Butterfield Corporation distributes investment land to these shareholders. The land distributed to Maria has a fair market value of $30,000 and a basis to Butterfield Corporation of $24,000. The land distributed to Tara has a fair market value of $30,000 and a basis to Butterfield Corporation of $26,000. Maria’s basis for her stock is $2,000. Tara’s basis for her stock is $1,000. There are no other distributions this year.
- Does Butterfield Corporation recognize any income or gain on the distribution of this land to its shareholders? If yes, how much?
- How much income or gain (specify if dividend income or capital gain) does Maria recognize as a result of this distribution?
- How much income or gain (specify if dividend income or capital gain) does Tara recognize as a result of this distribution?
- What is Maria’s basis for the land she received?
- What is Tara’s basis for the land she received?
- What is Butterfield Corporation’s current and accumulated E&P after the distribution?
Related Book For
South Western Federal Taxation 2015 Essentials of Taxation Individuals and Business Entities
ISBN: 9781285438290
18th edition
Authors: James Smith, William Raabe, David Maloney, James Young
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