Gain is recognized by an S corporation when it distributes appreciated property to its shareholders.

Name: Gain is recognized by an S corporation when it distributes appreciated property to its shareholders.
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Question

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When an S corporation distributes appreciated property to its shareholders, it must recognize any gain on the property as if it had sold the property. This gain is then allocated among the shareholders and included in their taxable income.

Gain Is Recognized by an S Corporation When It Distributes