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Gaston Corporation distributes § 1245 property as a dividend to its shareholders. The property’s fair market value is $580,000, and the adjusted basis is $560,000. In addition, the amount of the recapture potential is $55,000. What is the amount and character of Gaston’s gain or loss? As result of the distribution, Gaston recognizes $ ??? of ordinary income .

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Jarrod Robel
Jarrod RobelLv2
29 Sep 2019

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At the beginning of year 1, Bill and Cindy form an S-corp andare equal shareholders, each gave $5,000 in exchange for stock.Cindy loaned the corp another $5,000 on June 30th of year. Thecorporation had an ordinary loss in its first year of $12,000 andordinary income in its second year of $15,000. Assume that allparties use a calendar based taxable year and that neither thepassive nor at-risk limitations are applicable. If theS-corporation also made a $12,000 distribution on Oct 30th of year1 (split equally between the shareholders as generally required bythe one-class of stock rule), then what are the tax impacts of thedistribution?

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