Tangerine Corporation is considering a property distribution to its shareholders.

a. Complete the statements below to answer the following question: If appreciated property is to be used, does it matter to Tangerine whether the property distributed is a long-term capital asset or property subject to depreciation recapture?"

For distributions of appreciated property, gain is (deferred / recognized). But the classification of the gain (does / does not) matter as capital gains and depreciation recapture gains are taxed at (different rates / the same rates) to corporations. A (capital gain / depreciation recapture gain) could be offset against unused (capital losses / depreciation recapture losses / ordinary losses). Thus, the character of appreciated property distributed (never matters / would matter if there are unused capital losses / would matter if there are unused recapture losses).

b. Would your answer differ if the property distributed has a fair market value less than the adjusted basis?

(Yes / No) , because a distribution of property with a fair market value less than adjusted basis (does / does not) trigger a loss, so the character of the property (does / does not) matter.

Please select the correct options above