T3

Question 1

S Corp - Non Liquidating Distribution - Shareholder’s Stock Basis After Distribution

Answer 1

BeginningBalance
+ % of Gain from Distribution
< FMV of Distribution >

Question 2

S Corp - Non Liquidating Distribution - What is the shareholder’s Basis in Property Distributed

Answer 2

FMV of Property

• Same under liquidating distributions

Question 3

S Corp - Non Liquidating Distribution - Calculate the shareholder’s gain in property distributed

Answer 3

FMV - Adjusted Basis

Question 4

When is the S Corp subject to Build In Gain tax?

Answer 4

Within the first 5 years of the S Corp election

Question 5

S CORP
How is build in Tax determined

Answer 5

The Lessor of these 3:
1. Net unrealized gain of all asset at the time of the S Corp election

2. The realized gain of the asset sold
3. Taxable income in the year the asset is being sold, HAD IT BEEN an C - CORP

Question 6

S CORP
Liquidating Distribution
Calculate the gain of the liquidation distribution

Answer 6

The calculation is:
FMV - Basis in Stock

FMV would included the Cash + FMV of Property

The Basis of Stock would include:
Beg. Balance
+ Gain From Property
+ Any ordinary Income

• you’re liquidating - This is final. What are the giving you verses what you have earned/put in. You earned the income, you got a gain for the company selling the property.

They are GIVING you (FMV) the cash and the property.

Question 7

Partnerships
When would a gain in a property contributed be recognized?

Answer 7

When the liability is greater than the NBV, the difference between the two would be a gain

Question 8

Partnerships
How is the basis in distributed property different in partnerships vs S Corps

Answer 8

Generally - in a S Corp - the FMV of the property distributed is rolled over to the shareholder.

FMV of property = Shareholder Basis in distributed property

In Partnership - you must determine the partnerships outside basis (partnership interest) less cash received.

If the remaining basis is less than the NBV, then the partner takes a reduced basis in the property distributed.

Question 9

Partnership
When is a gain recognized in a distribution?

Answer 9

When the cash distributed is in excess of the partner’s basis

Question 10

Partnership
When is a gain recognized in a contribution?

Answer 10

When the liability of the property is greater than the NBV of the property

Question 11

Partnership
When is ordinary income recognized in a contribution?

Answer 11

When services is provided