What are potential tax effects to the distributing company

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Question - Under IRC Section 311(b)(2), when a corporation distributes a property, subject to a liability, or the shareholder assumes the obligation of the distributing corporation, the fair market value (FMV) of the property is at least equal to the amount of the liability.

Assume your client made a nonliquidating distribution with FMV exceeding its adjusted basis.

What are the potential tax effects to the distributing company (client) and the receivers (shareholders)?

Propose a plan in which you mitigate the potential tax impact on your client and the shareholders.

Reference no: EM132721738

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