George owns 100% of the stock of Yahoo. Yahoo has E&P of $20,000 and George has...

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George owns 100% of the stock of Yahoo. Yahoo has E&P of $20,000 and George has...

George owns 100% of the stock of Yahoo. Yahoo has E&P of $20,000 and George has a basis of $100,000 in Yahoo corporation stock prior to the events noted below.

Yahoo assets:

1. Grange Land with adjusted basis $100,000, fair market value $400,000

2. Lake Land with adjusted basis $800,000, fair market value $400,000

Ignore tax liability when adjusting for E&P.

A. Yahoo makes an operating distribution of Grange to George. What is Yahoo's recognized gain or loss?

business accounting

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Answer 1

Answer #1

As per Publication 542 ,if property is distributed to shareholders , Then corporation will report gain if FMV is greater than Adjusted basis , this is the same treatment as corporation will report if property is sold and the gain recognized will increase the E& P of company by that amount.

Yahoo makes grange land distributed to george

Recognized Gain = FMV - Adjusted BAsis

=400000-100000

=$300000

Recognized gain = $ 300000

And increased in E&P will be = $ 300000

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Answer 2

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