An S Corporation distributes property with a FMV of $100,000 and a basis of $60,000 to its sole shareholder. What is the tax consequence to the S Corporation?

1. Corporate Rule: Distribution of appreciated property is treated as a sale to the shareholder at FMV.<br/>2. Calculate Gain: $100,000 (FMV) - $60,000 (Basis) = $40,000.<br/>3. S Corp Context: This gain is recognized by the S Corp and passed through to the shareholder's K-1.