Facts for 13 15 Fred is the sole shareholder of FredCo, an S corporation. At a t
ID: 2573573 • Letter: F
Question
Facts for 13 15 Fred is the sole shareholder of FredCo, an S corporation. At a time when his stock basis is $30,000, the corporation distributes appreciated equipment worth $100, 000 (basis of $10,000). There s no built-in gain. The distribution is the only transaction for FredCo during the year, ie, no other revenue was earned and no other expenses were incurred. 13. How much income does Fred recognize on his 1040? $ 14. What is Fred's basis in his stock? s 15. What is Fred's basis in the equipment? $Explanation / Answer
When appreciated property is distributed first gain is recognised at the entity level then passed on to the shareholder.
Here gain on distribution = 100000-10000= 90000
13. Since fred is the sole shareholder he reports 100% of the gain in his return, amounts to 90000
14. Fred basis in the stock:
15. Fred's basis in the equipment will be the basis of corporation plus gain recognised= 10000+90000= 100000
Opening basis 30000 Add: Gain recognised 90000 Less: Distribution of property -100000 Closing basis 20000Related Questions
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