Reference no: EM131763153

Seal Corporation is owned equally by Curtis (stock basis of $50,000) and Riley Corporation (stock basis of $ 50,000). Seal Corporation has beginning E and P of $200,000 at January 1, 2016, and current taxable income for its 2016 calendar tax year of $80,000 before taking into account the following transaction: On December 31, 2016, Seal Corporation distributed equal one-half interests to its two shareholders in a factory building that had a total fair market value of $500,000( $250,000 to each shareholder), an adjusted basis to Seal Corporation of $280,000, and subject to a mortgage of $20,000 which the shareholders equally assumed. Seal Corporation also had the following information for its 2016 tax year:

Tax-exempt interest income $10,000
Excess charitable contribution not deductible in 2016 50,000
Insurance proceeds received on death of corporate officer 20,000
Insurance premiums paid on lives of corporate officers 15,000

Give the tax consequences of this distribution to each shareholder and to Seal Corporation assuming that Seal's total federal income tax liability paid in 2016, including the tax on the gain on the factory building distribution, is $100,250. The shareholders have each held their stock for 4 years.