QUESTION 27

1. An S Corporation has four shareholders. The corporation has land with a fair market value of $100,000 and a basis of $20,000. The corporation distributes the land in-kind to the four shareholders. Each shareholders basis in the corporation is $1,000. Assume the corporation has always been an S Corporation. Assume also that the AAA balance prior to the property distribution is zero.

   Same facts as above, except the corporation has accumulated E&P of $16,000.

   	a.	Each shareholder has a gain of $20,000.
   	b.	Each shareholder has a dividend of $4,000.
   	c.	Each shareholder has a gain of $20,000 and a dividend of $4,000.
   	d.	Each shareholder has no gain or loss until the property is sold.
   	e.	None of the above.

QUESTION 28

1. Shareholder A is the sole shareholder in S Corporation, an S Corporation. On January 1 of the tax year specified for the exam, As basis is $70,000. During that same year, the corporation has non-separately stated income of $30,000. A 1231 gain in the first half of the year of $3,000 and a charitable contribution in the second half of the year of $2,000. On July 1, of the same year, A sells his stock to B for $150,000.

   	a.	As gain is $80,000.
   	b.	As gain is $45,000.
   	c.	As gain is $62,000.
   	d.	As gain is $64,500
   	e.	None of the above.