Vermont Corporation distributed packaging equipment that it no longer needed to Michael Jason who owns 20% of Vermont's stock. The equipment, which was acquired in 2010, had an adjusted basis of $2,000 and a fair market value of $9,000 at the date of distribution. Vermont had properly deducted $6,000 of straight-line depreciation on the equipment while it was used in Vermont's manufacturing activities. What amount of ordinary income must Vermont recognize as a result of the distribution of the equipment?
a. $0
b. $3,000
c. $6,000
d. $7,000
Answer: C
Tax
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