Question: ACC 317 Advanced Federal Taxation
"Taxation of Shareholder Benefits" Please respond to the following (ONE PARAGRAPH ONLY):
If a company experiences a complete loss of an office building as a result of a fire and receives a $2 million recovery payment from the insurance company:
- Explain the tax consequences if the company decides not to rebuild.
- Identify the tax consequences if the company distributes the $2 million to its two (2) shareholders, assuming that no stock was exchanged in return.
- Under what conditions will the distribution meet the requirements to be treated as a partial liquidation and not a dividend? It should occur within the same taxable year in which plan is adopted.