George and Martha formed Washington Corporation as an S corporation several years ago George and Martha each have a 50 interest in the corporation At the beginning of the current year, their stock bases are $45,000 each In the current year, the corporation earns $40,000 of ordinary income In additi...

a Stock basis George Martha Beginning basis 45000 45000 Plus Ordinary income 20000 20000 Gain on dis ...

George and Martha formed Washington Corporation as an S corporation several years ago. George and Martha each

Question:

George and Martha formed Washington as an S several years ago. George and Martha each have a 50% interest in the At the beginning of the current year, their stock bases are $45,000 each. In the current year, the earns $40,000 of ordinary income. In addition, the distributes property to George having a $26,000 FMV and a $40,000 adjusted basis and distributes property to Martha having a $26,000 FMV and a $16,000 adjusted basis.
a. Determine what George and Martha recognize in the current year, and determine their ending stock bases. What bases do George and Martha have in the distributed property?
b. What tax planning disadvantages do you see with these property distributions?
c. How would you answer to Part a change if George and Martha form the Washington instead of an S 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... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...