If a corporation distributes appreciated property to its shareholders,the corporation will recognize any realized gain.

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When a corporation distributes appreciated property (property that has increased in value since its acquisition) to its shareholders, the corporation is required to recognize any realized gain on the distribution. This means that the corporation must recognize the difference between the fair market value of the property on the date of distribution and its adjusted basis (i.e., its original cost, plus any improvements or other adjustments) as taxable income. The shareholders also recognize gain to the extent that the fair market value of the property they receive exceeds their basis in the corporation's stock.

If a Corporation Distributes Appreciated Property to Its Shareholders,the Corporation