This can result in the shareholders reporting more than 12 months of passthrough income in a single year.
Conversely, if the corporation has little or no AE&P or the distribution is less than the AAA balance, a Sec.
1368 distribution allows full stock basis offset at the shareholder level, while sale or exchange treatment allows only part of the shareholder's stock basis to offset the distribution.
Determining the Basis of Property Received The shareholder's basis in assets received is their FMV at the time of the distribution.
Basis is not affected by the shareholder's assuming corporate liabilities or receiving corporate property that is subject to a liability (See. Structuring a Partial Liquidation for Best Tax Results A distribution in partial liquidation of the S corporation will also qualify for sale or exchange treatment under Sec.
The corporation distributes $45,000 cash to Tin return for his stock.