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?
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.