H Corp disributed land with a FMV of 100000 basis 20000 to

H Corp , disributed land with a FMV of $100,000 (basis $20,000) to Tina , a 70% shareholder. Determine the amount of the dividend and the basis of the land to Tina if E&P is $80,000

A) Dividend $80,000 Basis in the land $100,000 B) Dividend $80,000 Basis in the land $80,000 C) Dividend $100,000 Basis in the land $100,000 D) Dividend $100,000 Basis in the land $20,000

Solution

SOLUTION

The option D is the correct option.

In Case instead of the dividend of $100,000 FMV land with a basis of $20,000 is distributed, the shareholder has to recognize the FMV of land as dividend income. So, the Dividend is $100,000 and the basis of the land is $20,000.