In the current year, Jose receives a liquidating property distribution from Valenzuela Corporation..

In the current year, Jose receives a liquidating property distribution from Valenzuela Corporation. The basis of the property distributed is $25,000. What is the tax effect of the distribution for Valenzuela and for Jose if

a. The property distributed has a fair market value of $30,000, and Jose has a basis in his stock of $38,000?

b. The property distributed has a fair market value of $20,000, and Jose has a basis in his stock of $18,000?

c. Assume the same facts as in parts a and b, except that Valenzuela is an S corporation and Jose owns 20% of the stock. What is the tax effect of the distribution for Valenzuela and for Jose?

 

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