Corporation distributes depreciable property to its two equal shareholders. Matt receives a milling machine having a $60,000 adjusted basis and a $95,000 FMV. The corporation claimed $45,000 depreciation on the machine. The corporation purchased the milling machine from an unrelated seller four years ago. Laurel receives an automobile that originally cost $43,500 two years earlier and has a $29,000 FMV. The corporation claimed $27,500 depreciation on the automobile.

HOW WAS $13000 CALCULATED?

Shareholder's Change necessary basis for to improve the property received tax consequences 95,000 Shareholder Property b. Matt Milling machine Laurel Automobile Gain or loss recognized Amount Character $ 35,000 Ordinary income 13,000 Ordinary income 29,000 1