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

question 66

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

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Definitions:

Operation Of Law

Legal changes that occur automatically by application of law, without requiring action by any party.

War Breaks

Sudden onset of warfare or hostilities between nations or groups.

Travel Ban

Government-imposed restrictions on travel to or from specific countries or regions, often implemented for reasons related to public health, safety, or national security.

Liability

A legal obligation to compensate for the harm or damage one's actions have caused.