Wyld Corporation distributes to its shareholder Elizabeth (an individual) a piece of land with FMV $1,000,000. Wyld
Question:
Wyld Corporation distributes to its shareholder Elizabeth (an individual) a piece of land with FMV $1,000,000. Wyld purchased the land ten years ago for $525,000. Wyld’s current E&P is $300,000 and its accumulated E&P is $80,000. Elizabeth’s stock basis is $250,000. Elizabeth owns 85 shares (85%) of Wyld Corporation. The remaining 15 shares (15%) are owned by an unrelated party.
a. What are the tax consequences to Wyld Corp and Elizabeth if this is a nonliquidating distribution?
b. What are the tax consequences to Wyld Corp and Elizabeth if this is a liquidating distribution instead?
c. What are the tax consequences to Wyld Corp and Elizabeth if this is a stock redemption instead and in exchange for the land Wyld Corp redeems 50 of Elizabeth’s shares?
d. If you were advising Wyld Corp and Elizabeth on scenarios a-c listed above, which scenario would you advise them to proceed with and why?
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling