A Business Entity Has Appreciated Land Basis of $50,000 and Fair

question 75

Essay

A business entity has appreciated land basis of $50,000 and fair market value of $75,000) which it is going to distribute to Craig, one of its owners. The entity has earned substantial profits during its 15 years of operations and has reinvested most of them in the business. What are the tax consequences of the distribution to the business entity and to Craig if the business entity is an):
a. C corporation?
b. S corporation?
c. Partnership?

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Definitions:

Profit-Maximizing

A strategy where a firm adjusts production and sale levels to generate the highest profit possible.

Market Structure

The organization and characteristics of a market, including the level of competition, number of producers, and type of products.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Elastic

Describes the responsiveness of demand or supply to changes in price or income.