Reference no: EM132532012

Question - Turnip, Inc., an S corporation, distributes a tract of land held as an investment (FMV = $82,000, basis = $62,000) to Chang, its sole shareholder. An AAA bypass election was not made. Turnip, Inc. has an AAA balance of $10,000, an OAA balance of $1,000, a PTI balance of $5,000 and an AEP balance of $2,000. Chang's basis in his Turnip's stock is $20,000, has an individual marginal tax rate of 33% and a capital gains tax rate of 15%.

Required -

a. What is Turnip's recognized gain on the distribution?

b. What is the amount of Chang's distribution?

c. What is Turnip's ending AAA balance?

d. What is Turnip's ending PTI balance?

e. What is Turnip's ending AEP balance?

f. What is Turnip's ending OAA balance?

g. How much of the distribution is a Return of Capital?

h. How much of the distribution is an Excess Distribution?

i. What is the tax impact of the distribution to Chang?

j. What is Chang's basis in the land?

k. What is Chang's basis in his Turnip stock?