Evergreen Corporation distributes land with a fair market value of $50,000 to its sole shareholder.Evergreen's tax basis in the land is $200,000.Evergreen will report a loss of $150,000 on the distribution regardless of whether its earnings and profits are positive or negative.

Question

Quizplus · Accepted Answer

For tax purposes, losses on distributions of property to shareholders are not recognized. The corporation's basis and earnings and profits do not affect this rule; losses are simply not recognized on distributions to shareholders.

Evergreen Corporation Distributes Land with a Fair Market Value of $50,000