Distribution of Depreciable Property. On May 15 of the current year, Quick Corporation distributes to its shareholder Calvin a building having a $250,000 FMV and used in Quick's business. 

The building originally cost $180,000. Quick claimed $30,000 of straight-line depreciation, so that the adjusted basis of the building on the date of distribution for taxable income purposes is $150,000. The adjusted basis of the building for E&P purposes is $160,000. The building is subject to an $80,000 mortgage, which Calvin assumes. Quick has an E&P balance exceeding the amount distributed and is subject to a 34% marginal tax rate. 

a. What are the amount and character of the income Calvin recognizes as a result of the distribution? 

b. What is Calvin's basis in the building? 

c. What are the amount and character of Quick's gain or loss as a result of the distribution? 

d. What effect does the distribution have on Quick's E&P

Answer rating: 100% (QA)

a b C d 170000 dividend Calvin recognizes a dividend of 170000 250000 FMV 80000 mor... View the full answer