When a corporation distributes property to shareholders that has a FMV in excess of basis,the corporation will recognize a gain.

Name: When a corporation distributes property to shareholders that has a FMV in excess of basis,the corporation will recognize a gain.
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This is known as a corporate level gain and is taxable to the corporation. However, the shareholders may also recognize a taxable gain if the value of the property received exceeds their basis in the stock.

When a Corporation Distributes Property to Shareholders That Has a FMV