On July 1, 2007, Rose. Inc. (a calendar year C corporation), distributed an auto used 100% in its business to its sole shareholder. At the time of the distribution, the auto, which originally cost $18,000, had an adjusted basis of $6,000 and a fair market value of $5,000. There were no liabilities attached to the auto. No other distributions were made during 2007. As of January 1, 2007, Rose’s earnings and profits were $8,000. By what amount will Rose reduce its earnings and profits as a result of the distribution of the auto?
On July 1, 2007, Rose. Inc. (a calendar year C corporation), distributed an auto used 100% in its business?
Zero. There is no gain or loss recognized on distributions to shareholders.
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