Carolina Corporation, an S corporation, has no corporate E&P from its years as a C corporation. At

Question:

Carolina an S has no corporate E&P from its years as a C At the end of the year, it distributes a small parcel of land to its sole shareholder Shadiya. The fair market value of the parcel is $70,000 and its tax basis is $40,000. Shadiya's basis in her stock is $14,000. Assume Carolina reported zero taxable income before considering the tax consequences of the distribution.
a. What amount of gain or loss, if any, does Carolina recognize on the distribution?
b. How much gain must Shadiya recognize (if any) as a result of the distribution, what is her basis in her Carolina stock after the distribution, and what is her basis in the land?
c. What is your answer to (a) if the fair market value of the land is $25,000 rather than $70,000?
d. What is your answer to (b) if the fair market value of the land is $25,000 rather than $70,000?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...