Corporation K distributed land used in its business to its s

Corporation K distributed land used in its business to its shareholders in redemption of some of its outstanding stock. at the time of the distribution, the land had an adjusted basis to K of $200,000 and a fair market value of $500,000. Corporation K must recognize how much gain?

Solution

Land is a assets, when it will be distributed to its shareholders then the market value of the tland will be taken for consideration. So at the time of redemption of outstanding stock we take the market value of the common stock less lannd adjusted basis.

Gain on distribution of land = Market value of Land - Land adjusted basis

Gain on distribution of land = $ 500,000 - $ 200,000

Gain on distribution of land = $ 300,000

Answer = $ 300,000