Snipe Corporation, a calendar year taxpayer, has total E & P of $800,000.During the current year, Snipe makes property distributions to Tracy (the sole shareholder) as follows. $$\begin{array} { l r r }
& \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Stock investment } & \$ 100,000 & \$ 90,000 \
\text { Land } & 270,000 & 300,000
\end{array}$$ As a result of these distributions:

Question

Snipe Corporation, a calendar year taxpayer, has total E & P of $800,000.During the current year, Snipe makes property distributions to Tracy (the sole shareholder) as follows. $$\begin{array} { l r r } 
& \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Stock investment } & \$ 100,000 & \$ 90,000 \
\text { Land } & 270,000 & 300,000
\end{array}$$ As a result of these distributions:

Quizplus · Accepted Answer

CFor corporations, gains must be recognized on distributions of property to shareholders, but losses are not recognized. In this case, Snipe Corporation would recognize a gain of $30,000 on the distribution of the land (because the fair market value exceeds the adjusted basis), but would not recognize the $10,000 loss on the stock investment (since losses are not recognized on distributions). Therefore, option A is correct. Additionally, option C is correct in a general sense that losses are not recognized, but it's partially incorrect because it ignores the gain that must be recognized. However, given the choices, A is the most accurate regarding the specific transaction details provided.

Snipe Corporation, a Calendar Year Taxpayer, Has Total E As a Result of These Distributions: A)Snipe Must Recognize a P

Snipe Corporation, a Calendar Year Taxpayer, Has Total E As a Result of These Distributions:
A)Snipe Must Recognize a P