A Corporation Distributes Land and the Related Liability to Meg

question 20

Multiple Choice

A corporation distributes land and the related liability to Meg, its sole shareholder. The land has an FMV of $60,000 and is subject to a liability of $70,000. The corporation has current and accumulated E&P of $80,000. The corporation's adjusted basis for the property is $70,000. What effect does the transaction have on the corporation?

• A)A recognized loss of $10,000; its E&P is reduced by $70,000.
• B)A recognized loss of $10,000; its E&P is unchanged.
• C)No recognized gain or loss; its E&P is reduced by $60,000.
• D)No recognized gain or loss; its E&P is unchanged by the distribution.

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Definitions:

Service Capacity

The maximum amount of service that can be provided by a business or service provider in a given period.

Service Demand

The need or desire for professional services, which can vary based on factors like consumer preferences, trends, and economic conditions.

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The sequence of steps from initial concept to market launch that a company follows to create and introduce a new product.

Prototype

An initial model or release of a product used to test a concept or process, serving as a real-world proof of concept before full-scale production.