Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Carolina Corporation, an S corporation, has no corporate E&P from its years as a C corporation. At the end of the year, it distributes a

Carolina Corporation, an S corporation, has no corporate E&P from its years as a C corporation. At the end of the year, it distributes a small parcel of land to its sole shareholder, Shadiya. The fair market value of the parcel is $96,600, and its tax basis is $59,000. Shadiyas basis in her stock is $23,500. Assume Carolina Corporation reported $0 taxable income before considering the tax consequences of the distribution. (

a. What amount of gain or loss, if any, does Carolina Corporation recognize on the distribution?

b. How much gain must Shadiya recognize (if any) as a result of the distribution, what is her basis in her Carolina Corporation stock after the distribution, and what is her basis in the land?

Gain recognized
Stock basis
Land basis

c. Assume the fair market value of the land is $40,200 rather than $96,600. What amount of gain or loss, if any, does Carolina Corporation recognize on the distribution?

d. Assume the fair market value of the land is $40,200 rather than $96,600. How much gain must Shadiya recognize (if any) as a result of the distribution, what is her basis in her Carolina Corporation stock after the distribution, and what is her basis in the land?

Gain recognized
Stock basis
Land basis

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

Managerial Accounting

Authors: John Wild, Ken Shaw, Barbara Chiappetta

8th Edition

1264111924, 9781264111923

More Books

Students also viewed these Accounting questions

Question

Review the history of forensic psychology in the United States.

Answered: 1 week ago