What are the tax consequences to Speed and Bill

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Problem - Speed Corporation has current E&P of $200,000 and accumulated E&P of $100,000. It makes a distribution of land to its shareholder Bill. Bill's stock basis is $600,000. The land was purchased by Speed two years ago for $400,000 and at the time of the distribution has FMV of $550,000. Bill owns 75 shares, his sister owns 10 shares and the remaining 15 shares are owned by an unrelated party.

a) What are the tax consequences to Speed and Bill if this is a non liquidating distribution?

b) What are the tax consequences to Speed and Bill if this is a liquidating distribution?

c) What are the tax consequences to Speed and Bill if this is a stock redemption and Speed redeems 40 of Bill's shares in exchange for the land?

d) Which scenario (a, b, c) would you advise Speed and Bill to proceed with? Why?

Reference no: EM132865977

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