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Category: Tax
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Experience:  CPA with tax experience.
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Vaccines Corporation sold equipment used in its business to

Resolved Question:

Vaccines Corporation sold equipment used in its business to its sole shareholder Clancy Yarrow for $10,000. On the date of the sale, the fair market value of the equipment was $15,000 and Clancy’s adjusted basis was $12,000. What amount of the transfer is considered to be a dividend to Clancy?

a. $20,000
b. $5,000
c. $2,000
d. $0
Submitted: 5 years ago.
Category: Tax
Expert:  JKCPA replied 5 years ago.
Hi Customer,

Thanks for your question.

b. $5,000.
The fair market value $15000 less the bargain price $10,000 is considered a constructive dividend.

Hope this helps!
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