Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that he sold to Adam on August 1, 2020, for $180,000. Robin had accumulated E & P of $26,000 on January 1, 2020, and current E & P (for 2020) of $90,000. During 2020, Robin made the following distributions: $60,000 cash to Pete on July 1, 2020, and $120,000 to Adam on November 1, 2020. Required: Determine the tax consequences of the distribution to Pete and his gain on the sale of his stock to Adam. b. What are the tax consequences of the distribution to Adam?
Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that he sold to Adam on August 1, 2020, for $180,000. Robin had accumulated E & P of $26,000 on January 1, 2020, and current E & P (for 2020) of $90,000. During 2020, Robin made the following distributions: $60,000 cash to Pete on July 1, 2020, and $120,000 to Adam on November 1, 2020. Required: Determine the tax consequences of the distribution to Pete and his gain on the sale of his stock to Adam. b. What are the tax consequences of the distribution to Adam?
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 39P
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Question
Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that he sold to Adam on August 1, 2020, for $180,000. Robin had accumulated E & P of $26,000 on January 1, 2020, and current E & P (for 2020) of $90,000. During 2020, Robin made the following distributions: $60,000 cash to Pete on July 1, 2020, and $120,000 to Adam on November 1, 2020.
Required:
- Determine the tax consequences of the distribution to Pete and his gain on the sale of his stock to Adam.
b. What are the tax consequences of the distribution to Adam?
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