**Understanding Basis in Land Distribution from an S-Corporation**An S-Corporation holds a piece of land with an adjusted basis of $10,000 and a fair market value (FMV) of $100,000. When this land is distributed to a shareholder, the question arises: What basis does the shareholder have in this land?Possible Answers:- a. $0- b. It would depend on the shareholder's inside basis- c. $90,000- d. $100,000- e. $10,000Analyzing these options involves understanding the concepts of adjusted basis and fair market value in an S-Corporation distribution scenario.

An S-Corporation has ownership of a piece of land with an adjusted basis of $10,000 and a FMV of $100,000. It distributes this land to a shareholder, what basis would the shareholder have in this land? a. $0 b. It would depend on the shareholder's inside basis c. $90,000 d. $100,000 e. $10,000

An S-Corporation has ownership of a piece of land with an adjusted basis of $10,000 and a FMV of $100,000. It distributes this land to a shareholder, what basis would the shareholder have in this land? a. $0 b. It would depend on the shareholder's inside basis c. $90,000 d. $100,000 e. $10,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

**Understanding Basis in Land Distribution from an S-Corporation**

An S-Corporation holds a piece of land with an adjusted basis of $10,000 and a fair market value (FMV) of $100,000. When this land is distributed to a shareholder, the question arises: What basis does the shareholder have in this land?

Possible Answers:
- a. $0
- b. It would depend on the shareholder's inside basis
- c. $90,000
- d. $100,000
- e. $10,000

Analyzing these options involves understanding the concepts of adjusted basis and fair market value in an S-Corporation distribution scenario.

Expert Solution

Step 1: Define an S Corporation:

S companies are pass-through businesses, which implies that their profits, losses, deductions, and credits are distributed to shareholders. When a S company distributes property to a shareholder, the shareholder's basis in the property is equal to the property's fair market value on the distribution date.

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