A REIT has 500 shares of stock outstanding and is owned by 500 separate US taxable individuals. It has the following items of taxable income for the year ended December 31, 2020. The REIT makes declares a distribution of $400,000 for each share of REIT stock outstanding in 2020 (so the total to its 50 shareholders was $20,000,000). Assume all of shareholders are US taxable individuals in the highest tax bracket and they proportionally own the REIT shares:

Rents from real property: $10,000,000

Depreciation expense: ( 1,000,000)

Property expenses: ( 4,000,000)

Capital gain on the sale of real estate: 3,000,000

Interest income: 300,000

Total taxable income/earnings and profits: $ 8,300,000

1. Calculate the aggregate taxes due on the $20,000,000, assuming that each of the 50 shareholders had a tax basis of $1,000,000 in their REIT shares (a total of $50,000,000). Show each category of income from the REIT to the shareholders.

2. Calculate the aggregate taxes due on the $20,000,000, assuming that each of the 50 shareholders has a tax basis of $400,000 in their REIT shares (a total of $10,000,000). Show each category of income from the REIT to the shareholders.