a. How much gain, if any, does the the corporation recognize as a result of the distribution? b. By how much, if any, does the distribution increase Dave's gross income? c. By how much, if any, does the distribution increase Carlota's gross income? $

SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter18: Comparative Forms Of Doing Business
Section: Chapter Questions
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Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA
balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $197,500. Carlota's asset is
worth $276,500, and Dave's is worth $237,000.
a. How much gain, if any, does the the corporation recognize as a result of the distribution?
b. By how much, if any, does the distribution increase Dave's gross income? $
C. By how much, if any, does the distribution increase Carlota's gross income? $
Transcribed Image Text:Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $197,500. Carlota's asset is worth $276,500, and Dave's is worth $237,000. a. How much gain, if any, does the the corporation recognize as a result of the distribution? b. By how much, if any, does the distribution increase Dave's gross income? $ C. By how much, if any, does the distribution increase Carlota's gross income? $
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