Question

. Brett owns stock in Oriole Corporation (basis of $100,000) as an investment. Oriole distributes property (fair market value of $375,000; basis of $187,500) to him during the year. Oriole has current E & P of $25,000 (which includes the E&P gain on the property distribution), accumulated E & P of $100,000, and makes no other distributions during the year. What is Brett’s capital gain on the distribution

Answer 1

Brett’s capital gain on the distribution is $150,000

Step-by-step explanation:

According to the given data we have the following:

Oriole distributes property= fair market value of $375,000

Brett investment in Oriole Corporation=$100,000

Dividend to brett as distrubution= current year+accumulated E&P=$25,000+$100,000=$125,000

Therefore, Brett’s capital gain on the distribution= Oriole distributes property-Brett investment in Oriole Corporation-Dividend to brett as distrubution

=$375,000-$100,000-$125,000=$150,000

Brett’s capital gain on the distribution is $150,000