The corporation owns a building with a $160,000 adjusted basis and a $120,000 fair market value. The company has earnings and profits of $200,000. Is it more advantageous for the company to sell the property and distribute the sales proceeds to its shareholders or distribute the property to its shareholders and let them sell the property? Why? If you were a shareholder, what would be the most advantageous to you?© BrainMass Inc. brainmass.com October 25, 2018, 8:54 am ad1c9bdddf
Generally speaking, shareholders are interested in cash returns. As such, a stake in a building/property would not necessarily be something of interest for a shareholder for the following reasons:
* what would be necessary from a document point of view to essentially deed the property to the shareholders in order to facilitate this transaction --- probably would need legal and accounting help to do, which costs money
* all the shareholders would have to gain agreement on terms of sale --- could be very ...
A discussion on the merits of how to establish a return for shareholders of an asset that is not cash.
Finance: Exchange, Shareholder Loans, and Other Topics
1. What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation?
2. What conditions need to be met to avoid IRS classification of loans from shareholders as equity (contributions to capital)?
3. What is the tax treatment of losses from worthless stock or securities?
4. What is the tax consequence if an eligible entity elects to change from being treated as a corporation to being treated as a partnership or proprietorship?
5. If losses are suspended as a result of the lack of basis in S corporation stock, do the losses expire when the S election terminates?
6. When does a partner recognize gain on a contribution of property to a partnership?
7. What is the partnership's basis in property contributed to the partnership by a partner?
8. When is a partnership considered terminated?
9. What are the IRS rules for determining the tax year of a partnership?
10. How are start-up expenses and organization expenses handled for a new partnership?