A1. Effect of (Property) Distributions on Recipients
1. Robin Corporation has E&P of $60,000. It distributes land with a fair market value of $50,000 (adjusted basis of $30,000) to its sole shareholder, Charles. The land is subject to a liability of $10,000, which Charles assumes. Charles has a taxable dividend of $______. The basis of the land to Charles is $_________.
Land basis of Charles= Land FMV= $50,000
2. Ten percent of Tan Corporation is owned by Red Corporation. Tan Corporation has ample E&P to cover distributions made during the year. One distribution made to Red Corporation consists ...view middle of the document...
Crimson Corporation recognizes a ______of $_____ which is added to its E&P. E&P is then ________ by $________, the fair market value of the property. Brenda has dividend income of $___________.
The disribution reduce E&P by the amount of disributed or by the greater of the FMV or AB of the property distributed. E&P increased by the recognized gian on the property dividend
Recognized Gain= 20,000(FMV)-10,000(Baisi)=$10,000, this 10,000 was added to the E&P
E&P was decreased by $20,000 by FMV of the property
Brenda has dividend income of 20,000, this is the FMV of the property
7. Assume the same facts as in Example 6, except the fair market value of the property is $15,000 and the adjusted basis in the hands of Crimson Corporation is $20,000. Because the loss is not recognized and the adjusted basis is greater than the fair market value, E&P is __________ by $___________. Brenda reports dividend income of $_________.
E&P is increased by recognized gain on property dividend.
E&P was reduced by 20,000