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C12-Chp-05-3-Class-Sol-NonLiquidating Cash Dist

C12-Chp-05-3-Class-Sol-NonLiquidating Cash Dist - Page 1 of...

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a45e3d86545453e35a1f935dccaaf6f3e3a4a225.xls Page 1 of 2 Non-Liquidating Distribution by C Corporation Joe owns 100% of stock of a corporation. Joe has a basis of $20,000 in the entity. (Sound right?) Joe take a "current" distribution of $30,000 in cash. Basis FMV Cash $40,000 $40,000 Machinery 10,000 20,000 Land 20,000 30,000 Total $70,000 $90,000 Liabilities $44,000 Stock ($10 par-2,000 shares) 20,000 Retained Earnings (Also E & P) $6,000 Step Total $70,000 1. Joe's basis in the stock before distribution $20,000 2. Balance in E & P before dividend $6,000 3. Amount of Cash distributed to Joe $30,000 4. Joe's dividend income - E&P-Sec. 301( c) 5. Excess of Distribution over E & P 6. Joe's adjusted basis in stock before distribution 7. Joe's tax-free return of capital Sec. 301( c)(2) 8. Joe's capital gain. Sec. 301( c)(3) 9. Joe's ending basis in stock of corporation C Corporation (Distributions- Sec. 301, 312(a),(b), 316, 317) 1 Sec. 301 covers "property" distributions, defined in 317. 301 a Under Sec. 317, "property" is everything "except dividend of stock in the corp." 317 2 Under sec. 301, a distribution is a dividend -- to the extent it is from E&P. 301 c 1 Dividend is included in income. 61 a 7 3 Distribution in excess of E&P is not a dividend.
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