Reference no: EM132765755
Question: John is the sole shareholder of J, Inc. (a C-corporation). At the end of 2020 (before the distribution to John), J, Inc. had a $(100,000) deficit in current earnings and profits and a $110,000 positive balance in accumulated earnings and profits. . Note: During 2020, J, Inc. did not have any capital gains or losses for the current year nor does it have any capital loss carryforwards.
On December 31, J, Inc. distributed property to John with a fair market value of $80,000 and an adjusted basis of $20,000. John's stock basis in J, Inc. (prior to the distribution) was $160,000. John is in the 37% tax bracket and does not have any capital gain or losses.
1. What is the amount and character of this distribution to John?
2. How much is John's income tax liability (if any) as a result of this distribution?
3. What is John's basis in J, Inc. stock following the distribution?
4. Determine the tax consequences of this distribution to J, Inc.
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