What is tax result to stark corporation on the distribution

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Question - In a liquidating distribution, Stark Corporation distributes land to its shareholder. Stark Corporation acquired the land 1 years ago in a 351 transfer. At the time of the transfer the property had a FMV of $400,000 and adjusted basis of $670,000. Stark did not ever use the land in its business. This is the only asset it received in the transfer. In the current year and pursuant to a plan on liquidating Stark Corporation distributes the land to its shareholder Josephine. Josephine is a 30% owner of Stark and has stock basis of $880,000. At the time of the distribution the land had a FMV of $325,000. Stark has AEP of $580,000 and CEP before the distribution of $80,000.

a. What is the tax result to Stark Corporation on the distribution?

b. What is the tax result (including basis of the property received) to Josephine?

c. What tax planning advice would you provide to Stark and Josephine to achieve a more favorable tax result? Note any assumptions you have made in providing your answer.

Reference no: EM132202072

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