When an S corporation distributes appreciated property to its shareholders, the shareholders who receive the distributed property recognize their distributive share of the deemed gain.

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When an S corporation distributes appreciated property to its shareholders, the shareholders who receive the distributed property recognize their distributive share of the deemed gain. This is known as the "built-in gain" or "built-in loss" tax rules for S corporations.

When an S Corporation Distributes Appreciated Property to Its Shareholders