During the year, P&B Construction Corp.distributed a crane used in its business to S, who owns 100 percent of the stock.The crane was worth $10,000 and had a basis of $19,000.The corporation also distributed land worth $70,000 (basis $40,000).Assuming P&B has substantial earnings and profits, the corporation will report

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DWhen a corporation distributes property (other than money) to its shareholders, it is treated as if the corporation sold the property at its fair market value. Therefore, P&B Construction Corp. will recognize a gain on the distribution of the crane and the land because for tax purposes, the distribution is considered as if the corporation sold these assets at their fair market value. The crane had a fair market value of $10,000 but a basis of $19,000, which normally would suggest a loss; however, losses on distributions are not recognized for tax purposes. The land had a fair market value of $70,000 with a basis of $40,000, resulting in a $30,000 gain. Therefore, the corporation will report a $30,000 gain from the distribution of the land. The crane's loss is not recognized, so only the gain on the land is reported.

During the Year, P&B Construction Corp