Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

BIG Inc. distributed land to an individual shareholder in a nonliquidating distribution. On the date the land was distributed, BIG Inc.s adjusted basis in the

BIG Inc. distributed land to an individual shareholder in a nonliquidating distribution. On the date the land was distributed, BIG Inc.s adjusted basis in the land was $20,000, the fair market value of the land was $75,000, and the land was encumbered by a $35,000 mortgage, which liability was assumed by the shareholder. The corporations earnings and profits were $300,000 on the last day of the year in which the distribution was made after taking into effect any impact of the distribution on the corporations earnings and profits. As a result of the distribution, how much is the amount of dividend income to the shareholder, and what is the shareholders basis in the distributed property?

A. Dividend income of $20,000 and basis of $20,000.

B. Dividend income of $40,000 and basis of $20,000.

C. Dividend income of $40,000 and basis of $40,000.

D. Dividend income of $40,000 and basis of $75,000.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

CPA Exam Review 2020 At Least Know This Auditing And Attestation

Authors: At Least Know This

1st Edition

1706038364, 978-1706038368

More Books

Students also viewed these Accounting questions