Samantha owns stock in Pigeon Corporation (basis of $80,000) as an investment.Pigeon distributes property (fair market value of $300,000; basis of $150,000) to her during the year.Pigeon has current E & P of $20,000 and accumulated E & P of $80,000 and makes no other distributions during the year.What is Samantha's capital gain on the distribution?

Question

Quizplus · Accepted Answer

According to the rules of property distribution, the amount of distribution exceeding the E&P is classified as a capital gain. In this case, Pigeon Corporation has a current E&P of $20,000 and accumulated E&P of $80,000, which totals to $100,000 in E&P. As Pigeon has made a distribution of $300,000 in property, Samantha's capital gain on the distribution will be $300,000 - $100,000 = $200,000. However, as Samantha's basis in Pigeon Corporation was $80,000, her capital gain would be $200,000 - $80,000 = $120,000. Therefore, the correct answer is C.

Samantha Owns Stock in Pigeon Corporation (Basis of $80,000) as an Investment.Pigeon