Tennis, Corporation, a calendar-year corporation,  had a deficit in accumulated earnings and profits of $(800,000) and a positive balance in current earnings and profits of $100,000.  On December 31, 2021, Tennis, Corporation distributed a building to Darrel, its sole shareholder.  The building had a fair market value of $500,000 and an adjusted basis to the corporation of $150,000.  Darrel also assumed the $300,000 mortgage on the building.  Darrel is in the 37% tax bracket .   Determine the tax consequences to Darrel from this distribution of building and mortgage. Be

SWFT Corp Partner Estates Trusts
42nd Edition
ISBN:9780357161548
Author:Raabe
Publisher:Raabe
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
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Tennis, Corporation, a calendar-year corporation,  had a deficit in accumulated earnings and profits of $(800,000) and a positive balance in current earnings and profits of $100,000.  On December 31, 2021, Tennis, Corporation distributed a building to Darrel, its sole shareholder.  The building had a fair market value of $500,000 and an adjusted basis to the corporation of $150,000.  Darrel also assumed the $300,000 mortgage on the building.  Darrel is in the 37% tax bracket .

 

  1. Determine the tax consequences to Darrel from this distribution of building and mortgage. Be specific—and show your calculations.


  2. What are the tax consequences to Tennis, Corporation from this distribution?


  3. After this distribution, what are the earnings and profits of Tennis, Corporation?
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