[NetsForce]

Hi All,

I’m completely and utterly confused by shareholder basis… I think my basics are just all screwed up so I’m creating this thread to post the simple questions that are tripping me up as I go through Regulation…

QUESTION #1:

– If I have a C. Corporation with E&P of $10,000 that makes a cash dividend of $5,000 to its sole shareholder… What is the affect to shareholder income / basis?

(No basis effect and $5,000 as dividend income?)

QUESTION #2:

– If I have a C. Corporation with E&P of $10,000 that makes a PROPERTY dividend of $5,000 (FMV) $5,000 NBV subject to a $1,000 liability to its sole shareholder… What is the affect to shareholder income / basis?

(Basis increase of $5,000 and $4,000 of dividend income?)

QUESTION #3:

– If I have a C. Corporation with E&P of $10,000 that makes a PROPERTY dividend of $15,000 (FMV) $5000 (NBV) to its sole shareholder… What is the affect to shareholder income / basis?

(Basis increase of $15,000 and $15,000 of dividend income?*)

*This is the concept trying to be illustrated on Pg. R3-44 in Becker (?)

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*Sorry I made these questions up on the spot, if anyone has any other examples that will better illustrate these concepts it will be GREATLY appreciated.