How would your answers change if the distribution was made to a corporate shareholder?
Maple Corporation distributes land to a noncorporate shareholder. Explain how the following items are computed:
a) the amount of the distribution.
b) the amount of the dividend.
c) the basis of the land to the shareholder.
d) the start of the holding period for the land.
a) The distribution amount is the FMV of all property received. If the shareholder assumes
or acquires a liability in connection with the distribution, it reduces the amount of the distribution (but not below zero).
b) The distribution amount is a dividend to the extent it is paid out of the current and accumulated E&P of the corporation.
c) The basis of any property received is its FMV. Any liability assumed or acquired by the shareholder in connection with the distribution does not reduce the property's basis.
d) The holding period for the property begins on the day after the distribution date.
The answers would not change if the distribution was made to a corporate shareholder because Sec. 301(c) applies the same dividend rules to each type of shareholder. However, a corporation shareholder may be eligible for the dividend-received deduction.
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