Penguin Corporation E & P of $500,000) distributes land fair market value of $150,000; basis of $160,000) to an estate in a redemption to pay death taxes under § 303. Penguin Corporation recognizes a $10,000 loss as a result of the distribution.

Question

Quizplus · Accepted Answer

Under IRC § 311(a), a corporation does not recognize gain or loss on the distribution of property as a dividend. Since the distribution is in redemption to pay death taxes under § 303, it is treated as a distribution, and thus, Penguin Corporation would not recognize the $10,000 loss.

Penguin Corporation E & P of $500,000) Distributes Land Fair