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What options are available other than distributing machine

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Reference no: EM132346512

Question - Company X would like to make a property distribution (dividend) of the three (3) machines utilized within the business. Two of these machines are no longer required by the business. However, the FMV of each machine is $20,000 and the basis of each machine is as follows: Machine One - $27,000; Machine Two- $20,000 and Machine Three - $12,000.

1. If you were one of the recipients of the property dividend distributions, wouldn't you ask a question like, "why do I have to receive the machine, and why can't I just receive cash"?

2. Why can't the corporation sell the property with the gain/losses and recognize the gain or loss on its books, and then distribute the cash to the shareholders?

3. What other options are available other than distributing the machine?

4. What is the tax implications relative to the distribution of property by a corporation?

Reference no: EM132346512

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