Gamma Corporation distributes land to its sole shareholder, Lisa. The land has a basis to the corporation of $20,000 and a fair market value of $50,000. There is a $35,000 mortgage on the land which the shareholder agrees to assume. Before this distribution, Gamma has current E&P of $5,000 and accumulated E&P of $4,000. How much gain does Gamma Corporation recognize as a result of this distribution? How much dividend income does Lisa recognize as a result of this distribution? What is Lisa’s basis for the land? What is Gamma Corporation’s E&P after the distribution?
Gamma Corporation distributes land to its sole shareholder, Lisa. The land has a basis to the corporation of $20,000 and a fair market value of $50,000. There is a $35,000 mortgage on the land which the shareholder agrees to assume. Before this distribution, Gamma has current E&P of $5,000 and accumulated E&P of $4,000. How much gain does Gamma Corporation recognize as a result of this distribution? How much dividend income does Lisa recognize as a result of this distribution? What is Lisa’s basis for the land? What is Gamma Corporation’s E&P after the distribution?
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 28P
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Gamma Corporation distributes land to its sole shareholder, Lisa. The land has a basis to the corporation of $20,000 and a fair market value of $50,000. There is a $35,000 mortgage on the land which the shareholder agrees to assume. Before this distribution, Gamma has current E&P of $5,000 and accumulated E&P of $4,000.
- How much gain does Gamma Corporation recognize as a result of this distribution?
- How much dividend income does Lisa recognize as a result of this distribution?
- What is Lisa’s basis for the land?
- What is Gamma Corporation’s E&P after the distribution?
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