Fred is the sole shareholder of an S corporation in Fort Deposit,Alabama.At a time when his stock basis is $10,000,the corporation distributes appreciated property worth $100,000 (basis of $10,000).There is no built-in gain.Fred's taxable gain is:

Question

Quizplus · Accepted Answer

When an S corporation distributes appreciated property, the shareholder is generally treated as if he had sold the property to the corporation for fair market value. In this case, Fred's taxable gain would be the difference between the fair market value of the property ($100,000) and his stock basis ($10,000), resulting in a taxable gain of $90,000. Therefore, the correct answer is C.

Fred Is the Sole Shareholder of an S Corporation in Fort