Reference no: EM133153328

Question - In each of the situations described in (a) through (d), assume that X Corporation has only one shareholder, A (an individual) for 20X1.

X Corporation makes a single distribution to A of property on April 1, 20X1. The fair market value of the property is $6,000 and its adjusted basis is $2,000. Assume, for purposes of this question, that the corporate tax rate is 50% and there is other taxable income for the year of $1,000. A has basis in X Corporation stock of $1000.

Describe the federal income tax consequences to X Corporation and A under each of the following situations:

a. Accumulated E&P are $0.

b. Accumulated E&P are <$8,000>.

c. Accumulated E&P are $4,000.

d. Accumulated E&P are $4,000 and the property distributed has an adjusted basis of $8,000 instead of $2,000.