Purple Corporation Makes a Property Distribution to Its Sole Shareholder,Paul

question 98

Multiple Choice

Purple Corporation makes a property distribution to its sole shareholder,Paul.The property distributed is a house (fair market value of $189,000; basis of $154,000) that is subject to a $245,000 mortgage that Paul assumes.Before considering the consequences of the distribution,Purple's current E & P is $35,000 and its accumulated E & P is $140,000.Purple makes no other distributions during the current year.What is Purple's taxable gain on the distribution of the house?

• A)$0
• B)$21,000
• C)$35,000
• D)$91,000
• E)None of the above

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Definitions:

Asymmetric Carbon

A carbon atom bonded to four different groups, creating a chiral center.

Dextro-

Prefix indicating the right-handed (clockwise) configuration of a chiral molecule, often used in stereochemistry.

Levorotatory

Relating to a substance that rotates the plane of polarized light to the left.

Optical Activity

The ability of a molecule to rotate plane-polarized light, a property used to distinguish between enantiomers in stereochemistry.