Fill Form 1120 Schedule M 3 Dividends 2019-2024

Hello and welcome to the session in which we would look at this example that deals with property distribution to the shareholder. However, this property distribution also involved a liability. So let's take a look at the facts and then solve the problem. Line Corporation distributes land worth 300,000 at fair market value with an adjusted basis of 350,000 to its shareholder, Harry. The land is subject to a liability of 120, which Harry assumes. The question is, what are the tax consequences to Harry and Lime Corporation? Let's start with Harry. The distribution is considered dividend revenue because Line Corporation has enough earnings and profit (EMP). Therefore, the dividend revenue received by Harry will be the fair market value of the property, which is 300,000, minus the liability, which is 120. Thus, Harry's dividend revenue is only 180. It's important to note that when a property is distributed and there's a liability attached to it, the fair market value is counted as the dividend, and the liability reduces the dividend revenue. Now, let's determine the basis for the property for Harry. His basis in the property is 300,000, which is the fair market value. Next, we need to calculate the ending EMP for Lime Corporation. We also have to determine if there is any gain or loss involved in the distribution of the property. The fair market value of the property was 300,000, and the adjusted basis was 350,000. After subtracting the adjusted basis from the fair market value, we have a loss. However, we cannot recognize the loss in this case, as losses are not recognized in property distributions. Therefore, Lime Corporation does not have any recognized gain or loss on this distribution. Now, let's calculate the ending EMP for Lime Corporation. The beginning EMP was 500,000, and since there was no recognized gain, we don't...