Blue Corporation distributes land and building having a $70,000 adjusted basis and a $200,000 FMV to its sole shareholder,Marina.Blue has current and accumulated E&P exceeding $200,000.The property is subject to a $120,000 mortgage,which Marina assumes.What is the amount of the taxable dividend received by Marina?

Question

Quizplus · Accepted Answer

The amount of the taxable dividend received by Marina is equal to the FMV of the property ($200,000) minus the amount of liabilities assumed by Marina ($120,000) minus the adjusted basis of the property ($70,000), which is equal to $10,000. However, since Blue Corporation has current and accumulated E&P exceeding $200,000, Marina can take advantage of the Section 311(b) election and treat the distribution as a sale or exchange rather than a dividend. Therefore, Marina's taxable dividend received is $0.

Blue Corporation Distributes Land and Building Having a $70,000 Adjusted