An S Corporation Distributes Land with a Basis of $60,000

question 2169

Multiple Choice

An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholder. The tax results of the distribution will be

• A) $30,000 of gain recognized by the S corporation which is passed through to the shareholder.
• B) no gain recognized by the corporation but $30,000 of gain recognized by the shareholder.
• C) $30,000 of gain recognized by the S corporation and no pass- through to the shareholder.
• D) no gain to the corporation or to the shareholder.

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Definitions:

Basis Risk

Risk attributable to uncertain movements in the spread between a futures price and a spot price.

Short Hedger

An investor who enters into futures contracts to protect against potential price declines in an asset they hold.

Futures Price

The agreed-upon price for the sale/purchase of an asset at a future date, as determined in a futures contract.

Metals

Elements that are typically hard, shiny, malleable, fusible, and ductile, with good electrical and thermal conductivity, used in a wide range of industrial and decorative applications.