Corporation B had earnings and profits of $550,000 before distributions. Due to

Question

Corporation B had earnings and profits of $550,000 before distributions. Due to economic conditions, B, in partial liquidation, distributed Sec. 1231 property having an adjusted basis to B of $175,000 and a fair market value of $195,000 to Ms. Braun for 95% of her interest in Corporation B. Ms. Braun’s adjusted basis in the stock at the time of the distribution was $180,000. What is the amount of Corporation B’s recognized gain or loss? A. $20,000 B. $5,000 C. $(15,000) D. $0 Corporation B had earnings and profits of $550,000 before distributions. Due to economic conditions, B, in partial liquidation, distributed Sec. 1231 property having an adjusted basis to B of $175,000 and a fair market value of $195,000 to Ms. Braun for 95% of her interest in Corporation B. Ms. Braun’s adjusted basis in the stock at the time of the distribution was $180,000. What is the amount of Corporation B’s recognized gain or loss? A. $20,000 B. $5,000 C. $(15,000) D. $0

Explanation / Answer

A 20000

effect of non liquidating distributions on corporation: gain are recognised on property = FMV -Basis

= 195000-175000= 20000

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