Travis owns 100% of stock of the C corporation Cupcake, Inc. (Cupcake). Cupcake has total E&P of
Question:
Travis owns 100% of stock of the C corporation Cupcake, Inc. (Cupcake). Cupcake has total E&P of $20,000 and Travis has a basis of $100,000 in his Cupcake stockprior to the following distribution. Cupcake makes a nonliquidating distribution to Travis of land held for investment. The land has a $90,000 adjusted basis and a fair market value of $400,000 at the time of the distribution. What is the amount and character of Travis's income from this distribution?
A. $0 income
B. $400,000 ordinary income
C. $20,000 dividend; $380,000 capital gain
D. $20,000 dividend; $100,000 return of basis; $280,000 capital gain
E. $330,000 dividend; $70,000 return of basis; $0 capital gain
F. $400,000 dividend
G. None of the above (some other amount/character is correct)
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill