Hi All,

From becker website, all 2009 REG AICPA Released questions do not have explaination at all. Just wonder if anyone can figure this particular question:

Brisk Corp. is an accrual-basis, calendar-year C corporation with one individual shareholder. At year end, Brisk had $600,000 accumulated and current earnings and profits as it prepared to make its only dividend distribution for the year to its shareholder. Brisk could distribute either cash of $ 200,000 or land with an adjusted tax basis of $ 75,000 and a fair market value of $ 200,000. How would the taxable incomes of both Brisk and the shareholder change if land were distributed instead of cash?

             Brisk's taxable income         Shareholder's taxable income

a.               No change                                No Change

b.               Increase                                   No Change

c.               No change                                 Decrease

d.               Increase                                    Decrease

Answer: b

My question to this forum is why Shareholder's taxable income no change b/c it suppose to be increase.

arushi_13 wrote: Shareholder TI will not change whether he receives cash or appreciated land as dividend as in either case his TI will increase.So there is no change on Shareholder's TI. Whereas in the case of Corp. if it distributes cash no gain will be recognized. However,when it distributes appreciated property it will recognize gain = 200k-75k = 125k. You have to compare the impact on shareholders TI when 1)cash is distributed to him or 2) Appreciated property is distributed as dividend.

Hi Arushi,

Thanks for the explanation. Good luck!

What # is this question?  I'm trying to index all the AICPA released questions in the Exam Archive.

Thanks!

Hi,

It's # 2