Distributions from a Corporation

Question 1

What’s required to determine E&P?

Answer 1

-Taxable income must be adjusted to represent economic income

Question 2

What is the reduction of corporate E&P for distributions of property?

Answer 2

• Greater of FMV or AB of property reduced by liabilities assumed by shareholder
• Distribution of appreciated property will first increase E&P by amount of gain recognized

Question 3

Can distributions create a deficit in E&P?

Answer 3

-No, only losses

Question 4

For corporate property distributions, if liability on property exceeds property’s FMV, what is FMV treated as?

Answer 4

-Equal to the liability

Question 5

What is the basis to the shareholder of corporate distributed property?

Answer 5

-FMV