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21 April, 19:06

Quinlan has ample E & P to cover any distributions made during the year. One distribution made to a shareholder consists of property with an adjusted basis of $536,200 and a fair market value of $321,720. What are the tax consequences of this distribution to Quinlan? If an amount is zero, enter "0". As a result of the distribution, Quinlan Corporation has a realized of $ of which $ is recognized. The shareholder received property with a basis of $

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  1. 21 April, 22:49
    0
    1. Quinlan distribution has realized a loss of

    $214,480 of which $0 is recognized.

    2. The shareholder received property with a basis of $321,720

    Explanation:

    1.

    When property is been said to be distributed to shareholders the amount of dividend equal to the fair value of the said property which is $321,720 on the date of the distribution. Therefore the amount of taxable dividend is $321,720 which is before the dividends received deduction.

    Therefore;

    Net loss which shall not be allowed ($536,200-$321,720)

    =$214,480

    Quinlan distribution has realized a loss of

    $214,480 which is not allowed to be recognized

    2. Adjusted basis of the property distributed is $321,720
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