What are the tax consequences to the shareholders

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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 21 percent 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.

Problem 1:
If the shareholders' average bases in their shares are $45 per share, what are the tax consequences to the shareholders and the corporation from this distribution?

Problem 2: How would your answers change if Beacon received only $600,000 for the assets of the trucking business?

Reference no: EM132837380

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