Please answer these questions

1:Masterson, Inc. is a C-corporation that would like to make an S-election. The corporation has both common and preferred stock. The company also has 200 shareholders. Many of the corporations shareholders are partnerships and other C-corporations. About 90% of the firms shareholders are citizens of European countries who do not reside in the U.S. The corporation is also interested in avoiding the double tax on earnings that occurs when an S-corporation has AEP from C-corp years that is distributed.

Therefore, Masterson plans to invest excess funds in investment assets (stocks and bonds) before converting to S-status. The company also owns land with an adjusted basis of $20,000 and a FMV of $200,000. After converting to S-status, Masterson hopes to sell the land and avoid the double taxation of the depreciation. Please indicate if you see any problems with these plans.

2: Stetson, an S corporation, distributes $2,400 to the corporations sole shareholder. At the time of the distribution, the firms sole shareholder has a basis of $2,000 in Stetson stock. The Stetson AAA account has a balance of $500. The Stetson AEP account has a balance of $750. The Stetson OAA account has a balance of $350. The sole shareholder also made a personal loan of $200 to the shareholder. How much gain/loss is recognized by the sole shareholder? What is the character of that gain?