Sometimes one CORP owns another CORP! A "Parent" and a "SUBsidiary!" And the SUB may make regular, on going distributions to the PARENT! What if SUB makes a distribution to the PARENT of a piece of land. The SUB's basis on the land was $$2$ million. The FMV of the land was $$5$ million. SUB has E&P of $$100$ million. How is this distribution treated?

Sometimes one CORP owns another CORP! A "Parent" and a "SUBsidiary!" And the SUB may make regular, on going distributions to the PARENT! What if SUB makes a distribution to the PARENT of a piece of land. The SUB's basis on the land was $$2$ million. The FMV of the land was $$5$ million. SUB has E&P of $$100$ million. How is this distribution treated?

Recognized gain of $$3$ million to the SUB and dividend of $$5$ million to PARENT

No gain recognized by the SUB and dividend of $$5$ million to PARENT.

No gain recognized by the SUB and dividend of $$2$ million to PARENT.

Capital gain of $$3$ million to the PARENT and no impact on the SUB.