Castle and Dave formed an S corporation; Castle owns 75% of the outstanding shares, and Dave owns

Question:

Castle and Dave formed an S corporation; Castle owns 75% of the outstanding shares, and Dave owns the rest. When the entity’s AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $45,000. Castle’s asset is worth $90,000, and Dave’s is worth $50,000.

a. How much gain, if any, does the the corporation recognize as a result of the distribution?

b. By how much, if any, does the distribution increase Dave’s gross income?

c. By how much, if any, does the distribution increase Castle’s gross income?

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... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...

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