Zachariah is the sole shareholder of an S corporation in Detroit, Michigan. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Zachariah's taxable gain is:

Question

Linus

Business

9 November, 10:21

Zachariah is the sole shareholder of an S corporation in Detroit, Michigan. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Zachariah's taxable gain is:

+2

Answers (1)

Know the Answer?

Lydon · Answer 1

B) $90,000

Explanation:

Distribution of appreciated property to the stockholders of an S Corporation are taxable, and must be recorded at fair market value. In this case, Zachariah is the only stockholder, but the same rule applies. Zachariah's taxable gain = fair market value - stock basis = $100,000 - $10,000 = $90,000.