Wills Corporation, Which Has Accumulated a Current E&P Totaling $65,000

question 27

Multiple Choice

Wills Corporation, which has accumulated a current E&P totaling $65,000, distributes land to its sole shareholder, an individual. The land has an FMV of $75,000 and an adjusted basis of $55,000. The shareholder assumes a $15,000 liability associated with the land. The shareholder will recognize

• A) $60,000 of dividend income and have a $75,000 basis in the land.
• B) $60,000 of dividend income and have a $60,000 basis in the land.
• C) $65,000 of dividend income and have a $75,000 basis in the land.
• D) $65,000 of dividend income and have a $65,000 basis in the land.

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Definitions:

Capital Projects Fund

A fund used by governmental entities to finance major capital outlays, such as buildings, infrastructure, and other significant projects.

Financial Statements

Comprehensive reports that provide information about an organization's financial position, performance, and changes in financial condition.

Enterprise Fund

A fund typically used by government entities to account for operations financed by fees and charges for services provided.

Fund Financial Statements

Financial reports that focus on the assets, liabilities, revenues, and expenses of governmental funds, proprietary funds, or fiduciary activities managed by a government or nonprofit organization.