Quitclaim transfer between two corporations

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Hi guys,

If my client's family owns 100% shares in two C corporations, and transferred real estate title through quitclaim without any consideration, how would each corporation claim it on their tax return. Would it be treated as distribution at FMV by the giving corporation and capital contribution received by the receiving corporation?
 
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GPT-4 Answer:

"I am not an accountant, but I can try to provide some general guidance on this issue. It seems that if a corporation transfers real estate to another corporation without any consideration, it could be treated as a distribution at fair market value (FMV) by the giving corporation and a capital contribution received by the receiving corporation.

For the giving corporation, this distribution could be considered a taxable event, and it may need to recognize a gain or loss on the transfer based on the difference between the FMV of the property and its adjusted basis. This gain or loss would generally be reported on the corporation's tax return.

For the receiving corporation, the property would likely be treated as a capital contribution, and its basis in the property would generally be the FMV at the time of the transfer. The receiving corporation would not recognize any income on the receipt of the property, but it would need to adjust its balance sheet to reflect the new asset and the corresponding increase in its capital accounts.

It is important to consult with a tax professional or accountant to discuss the specific details of this transaction and ensure that it is reported correctly on the tax returns of both corporations."

[disclaimer]
I am not an accountant. I pasted the above question into GPT-4 and got this answer. I am just trying to understand how well these model work. Note that GPT-4 did not provide definitive guidance but is asking that a professional be consulted in this case. FASAB handbook top page references: 2381 2147 2644 2143
 

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