Omega Company has two equal owners, William and Mary. Prior to a property distribution, each owner has a $200,000 basis in his or her ownership interest. In the current year, Omega distributes property to William having a $50,000 FMV and a $30,000 basis and distributes property to Mary having a $50,000 FMV and a $60,000 basis. The property is a capital asset. In Parts a and b, determine Omega’s gain or loss recognized (if any), the owners’ gain or loss recognized (if any), and the owners’ basis in his or her ownership interest after the distribution.
a. Omega is partnership.
b. Omega is an S corporation.
c. In the S corporation case, is distributing the loss property to Mary a good idea? Why or why not?