Wills Corporation, Which Has Accumulated a Current E&P Totaling $70,000

question 60

Multiple Choice

Wills Corporation, which has accumulated a current E&P totaling $70,000, distributes land to its sole shareholder, an individual. The land has an FMV of $75,000 and an adjusted basis of $60,000. The shareholder assumes a $15,000 liability associated with the land. The transaction will have the following tax consequences.

• A)The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $75,000.
• B)The corporation will recognize no gain; the shareholder will recognize dividend income of $75,000.
• C)The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $60,000.
• D)The corporation will recognize no gain; the shareholder will recognize dividend income of $60,000.

---

Definitions:

Family and Medical Leave

Federal law in the United States allowing eligible employees to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage.

Unpaid Leave

A period of time that an employee is allowed to be away from work without receiving pay, often used for personal, family, or medical reasons.

Eligible Employee

An employee who meets the criteria set forth by an employer or government to receive benefits or participate in programs.

Cultural Relativism

The principle that an individual's beliefs and activities should be understood by others in terms of that individual's own culture, emphasizing that no culture is superior to another.