Serenity receives a nonliquidating distribution from the Hickock Corporation, an S corporation. Which of the following statements concerning nonliquidating distributions from an S corporation are correct?
I.A nonliquidating cash distribution is taxable if the amount distributed exceeds Serenity's basis in Hickock.
II.The amount of the dividend on a nonliquidating distribution of property is the fair market value of the property distributed.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Serenity receives a nonliquidating distribution from the Hickock Corporation, an S corporation. Which of the following statements concerning nonliquidating distributions from an S corporation are correct?
I.A nonliquidating cash distribution is taxable if the amount distributed exceeds Serenity's basis in Hickock.
II.The amount of the dividend on a nonliquidating distribution of property is the fair market value of the property distributed.
​
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

A nonliquidating distribution from an S corporation is not taxable to the extent of the shareholder's basis in the corporation. Any excess is taxable as a dividend. The amount of the dividend on a nonliquidating distribution of property is the fair market value of the property distributed.

Serenity Receives a Nonliquidating Distribution from the Hickock Corporation, an S