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: 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:  As a result of these distributions:

Quizplus · Accepted Answer

When a corporation makes a property distribution, it must recognize gain to the extent of any E&P. In this case, the property distribution is $300,000 ($200,000 of stock and $100,000 of land), which is less than the total E&P of $800,000. Therefore, Snipe Corporation must recognize gain of $300,000 - $270,000 (Tracy's basis in the land) = $30,000. There is no recognized loss in this situation. The basis of the stock investment would remain the same at $100,000.

Snipe Corporation,a Calendar Year Taxpayer,has Total E & P of $800,000.During