Question

Apricot Corporation distributes property ($125,000 basis and $150,000 fair market value) to its sole shareholder, Ellie. The property is subject to a liability of $200,000, which Ellie assumes. Apricot has E

Answer 1

Answer: $75,000; $400,000.

Step-by-step explanation:

Here is the complete question:

Apricot Corporation distributes property ($125,000 basis and $150,000 fair market value) to its sole shareholder, Ellie. The property is subject to a liability of $200,000, which Ellie assumes. Apricot has E & P of $325,000 prior to the distribution. a)What gain, if any, does Apricot recognize on the distribution? What is Apricot’s accumulated E & P at the start of the following year?

The gain recognized by Apricot on the distribution will be:

= $200,000 - $125,000

= $75,000

Apricot’s accumulated E & P at the start of the following year will be:

= $325,000 + $75,000

= $400,000