Property Distribution- Corp to Shareholder

  • Creator
    Topic
  • #3222671
    jdl
    Participant

    Hi everyone- can someone show me the journal entry for the below problem from the Corporation perspective? I know the shareholder perspective receiving the property is the following. Thanks for the help- fellow CPA’s! :

    Asset 38000

    Liability 3000
    Gain 35000

    Fox, the sole shareholder in Fall, a C corporation, has a tax basis of $60,000. Fall has $40,000 of accumulated positive earnings and profits at the beginning of the year and $10,000 of current positive earnings and profits for the current year. At year end, Fall distributed land with an adjusted basis of $30,000 and a fair market value (FMV) of $38,000 to Fox. The land has an outstanding mortgage of $3,000 that Fox must assume. What is Fox’s tax basis in the land?
    a.
    $35,000
    b.
    $27,000
    c.
    $30,000
    d.
    $38,000

    Explanation

    AUD - 80
    BEC - NINJA in Training
    FAR - 80
    REG - NINJA in Training
    2 Down- 2  To Go- Best of Luck to Everyone.
Viewing 3 replies - 1 through 3 (of 3 total)
  • Author
    Replies
  • #3223397
    AGI
    Participant

    when you trade land it's always fair market value in a company, at least IRS only cares about its FMV.

    Company:
    Land = 35
    Less: Release of Mortgage Obligation = (-3)
    Tax Basis = 38

    NY - CPA

    New York - NYC
    Passed CPA Exam (11/2014)
    In search for a position in NYC that will fulfills the license requirement.

    #3223433
    jdl
    Participant

    Thanks- is there a way to show in a journal entry as in below? I'm trying to see what gain the corporation recognizes/ what other acct is cleared.

    XX
    Liability 3000
    Land 30,000
    Gain XX

    AUD - 80
    BEC - NINJA in Training
    FAR - 80
    REG - NINJA in Training
    2 Down- 2  To Go- Best of Luck to Everyone.
    #3224102
    AGI
    Participant

    I just noticed I wrote the top wrong. Why did I wrote land as 35? The tax basis is correct thou – at 38.

    —–
    Distribution to Owner 38000
    Cash 38000

    Cash 38000
    Liability 3000
    Land 30000
    Gain on Sale 11000

    NY - CPA

    New York - NYC
    Passed CPA Exam (11/2014)
    In search for a position in NYC that will fulfills the license requirement.

Viewing 3 replies - 1 through 3 (of 3 total)
  • You must be logged in to reply to this topic.