Question

Complete Tax Research problem #C:4-64 on page "Corporations" 4-47 of your textbook

Scott and Lynn Brown each own 50% of the Benson Corporation Stock. During the current year, Benson made the following distributions to its shareholders:

Shareholder	Property Distributed	Adjusted Basis to Corp.	Property’s FMV
Scott Brown	Land Parcel A	$40,000	$75,000
Lynn Brown	Land parcel B	120,000	75,000

Benson has E&P of $250,000 immediately before the distribution. Prepare a memorandum for your tax manager explaining how Benson should treat these transactions for tax and financial accounting purposes. How will the shareholders report the distributions? Bensons tax rate is 21%. You can ignore the financial statement implications, just concentrate on the tax treatment.

Answer 1

Finstly, Bensen Corhorcton xhonld revatne their Land Parcel in te bock Account due to ushich there wuill be 10000 35 oo / Loss en Land farcelg : (45…) Net Loss lo,o oc sti to Land 35,ov0 01, D Lani Parcel A To Rewaluatien Reserve Ale る5 000 Revaluation Resee 2 나5,000 To Lard Parcel To Land Parcel A 75 00O 5 000 To Land Parel & TAX TREATMENT 2,50, 0oo 35 DDo L+5 ooo fん Less: Loss 2, 4, 00o Benson's Tan Rete i2i Oh