Question

on december 31, a C corporation made a nonliquidating distribution of the following assets to its sole shareholder what gain or loss should the corporation recognize as a result of the distribution?

Answer 1

A C corporation should recognize a gain or loss in a nonliquidating distribution of assets to its sole shareholder based on the fair market value of the assets compared to their adjusted basis.

Step-by-step explanation:

When a C corporation makes a nonliquidating distribution of assets to its sole shareholder, the corporation should recognize a gain or loss based on the fair market value of the distributed assets. If the fair market value of the assets is greater than their adjusted basis, the corporation would recognize a gain. On the other hand, if the fair market value is less than the adjusted basis, the corporation would recognize a loss.

For example, if the corporation distributes a building with a fair market value of $100,000 and an adjusted basis of $80,000, the corporation would recognize a gain of $20,000.

Answer 2

A C Co-orporation will recognize a capital gain or loss depending on the fair market value of the assets when making a non-liquidating distribution to its sole shareholder on 31st December.

If the fair market value of the assets distributed exceeds their basis, the corporation will recognize a capital gain. If the fair market value is less than the basis, the corporation will recognize a capital loss.

For example, if the corporation distributes an asset with a basis of $10,000 but a fair market value of $15,000, it will recognize a capital gain of $5,000.