A C Corporation distributes land to a shareholder as a dividend. FMV $100,000; Basis $120,000. What is the tax consequence to the Corporation?

Answer options:

No loss recognized.

$20,000 Loss recognized.

$20,000 Gain.

Loss deferred until shareholder sells.

How to approach this question

1. Rule: IRC §311(a) - No gain or loss recognized on distribution of property? §311(b) requires Gain recognition. But Loss is NOT recognized. 2. Scenario: Basis ($120k) > FMV ($100k) -> Loss. 3. Result: Loss is disallowed.

Full Answer

A.No loss recognized.✓ Correct

Under IRC §311(a), no loss is recognized by a corporation on the distribution of property with a tax basis in excess of its fair market value.

Common mistakes

Thinking losses are treated symmetrically with gains.

Question 44 All questions Question 46

Practice the full CPA TCP Practice Exam

68 questions · hints · full answers · grading

More questions from this exam

Q01An individual taxpayer, filing single, exercised 1,000 Incentive Stock Options (ISOs) in Year 1 w...Hard Q02A taxpayer has the following income and losses for Year 1: - Salary: $200,000 - Interest ...Hard Q03In Year 1, a taxpayer donates a piece of artwork to a public charity (50% limit organization). Th...Hard Q04A taxpayer has $10,000 of investment interest expense in Year 1. They have the following income i...Medium Q05A single taxpayer has the following financial profile for Year 1: - Wages: $180,000 - Net...Medium

View all 68 questions →