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6. A, an individual, owns 100% of X Co. a. X distributes a parcel of land...

6. A, an individual, owns 100% of X Co.

a. X distributes a parcel of land with a basis of $40 and a fair market value of $100 to A. What gain or loss does X have from this transaction?
b. Suppose instead that X distributes a piece of equipment with a cost of $60 and accumulated depreciation of $20. Assume that A will use the asset in A's business. Will these facts change your answer?
c. Same as (a) except that the land has a FMV of $30. How will this change your answer?
d. What impact does the distribution have on the E&P of X?
e. What is the amount of distribution to A? What basis will A have in the land?
f. Same as (e) except that the land is subject to a mortgage of $20. Discuss how this will change your analysis.

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Answer #1

a. Gain of $40.

b. Gain of $60.

c. Gain of $12.

d. There will be no impact the distribution have on the E&P of X.

e. $100

f. $80

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