What are the tax consequences to the shareholder

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Beacon Corporation had operated a chain of restaurants for 15 years and owned a small trucking company for 10 years. It decided to sell all the assets of the trucking company (Section 1231 assets) for $1,500,000. The assets had a basis of $900,000 and the corporation is in the 34 percent marginal tax bracket. The company invested half of the after-tax sale proceeds to update some of its restaurants, and distributed the remaining half to its shareholders in exchange for 10,000 shares of their stock in Beacon.

a. If the shareholders' average bases in their shares are $45 per share, what are the tax consequences to the shareholder and the corporation from this distribution?

b. How would your answers change if Beacon received only $600,000 for the assets of the trucking business?

Reference no: EM13539819

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