What are the benefits of a property distribution in lieu of cash distribution for shareholders, the corporation and foreign trust? Need help

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For a C-corp a property distribution would be at FMV and treated as a sale or a taxable dividend depending upon how the transfer is handled.

For a S-corp a property distribution would be at FMV and treated as a tax-free distribution of S-corp accumulated profits. If it exceeds profits the excess would be treated as a sale of S-corp stock.

In either case the corporation has a gain or loss on the difference between the FMV and the tax cost basis. The C-corp pays tax on the gain/loss, the S-corp passes the gain/loss to the shareholder for tax.

Depending upon the facts this could be a complicated or simple transaction.

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