Posey Corporation distributes land with a fair market value of $20,000 and a basis of $12,000 to Brock, a shareholder. Posey's earnings and profits are $125,000. What must Brock report as income from the property distribution?
A)$- 0 -
B)$8,000
C)$12,000
D)$20,000

Question

Quizplus · Accepted Answer

Brock must report the fair market value of the property received as income, which is $20,000. This is because the distribution is treated as a dividend to the extent of Posey's earnings and profits, which are sufficient to cover the distribution.

Posey Corporation Distributes Land with a Fair Market Value of $20,000