What are the tax consequences of the distribution to iceberg

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Reference no: EM131794286

Problem

Iceberg Lounge, Inc., is an accrual basis corporation which reports on the calendar year. Oswald Cobblepot owns 90% of the stock (he cut Butch in) and has a stock basis of $90,000. On January 1 of the current year, Iceberg had accumulated E & P of $200,000. Operating income (exclusive of the following transactions, generated current E & P of $50,000. On November 1, Iceberg distributes an warehouse building to Oswald. The building had a FMV of $100,000 and a basis of $80,000. Oswald assumed the $110,000 mortgage on the warehouse. His accountant, Nygma, had used the ADS depreciation method for both income tax and E & P purposes.

What are the tax consequences of the distribution to a. Iceberg and b. Oswald (no one cares about Butch).

(In your answer, be sure to describe the effects on taxable income for both of them, the impact of the distribution on E & P, and Oswald's basis in the warehouse.)

Reference no: EM131794286

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