An S Corporation has four shareholdrs. The Corporation has land with a fair mark

Question

An S Corporation has four shareholdrs. The Corporation has land with a fair market value of $100,000 and a basis of $20,000. The corporation distributes the land in-kind to the four shareholders. Each shareholders' basis in the corporation is $1,000. Assume the corporation has always been an S. Assume also that the AAA balance prior to the property distribution is zero.

a Each shareholder has a $20,000 gain

b Each shareholder has a $20,000 gain and a $4,000 gain.

c Each shareholder ahs a $4,000 gain.

d Each shareholder has no gain or loss until sellling the property.

e None of the above

Which one is the correct answer and explain why?

Explanation / Answer

Answer is

d. Each shareholder has no gain or loss until sellling the property.

here property distribution percentage is not given

four share holders divide their properties based on their investments.

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