In the Current Year, Red Corporation Has $100,000 of Current

question 11

Essay

In the current year, Red Corporation has $100,000 of current and accumulated E&P. On March 2, Red Corporatio distributes to Randy, a shareholder, a parcel of land (a capital asset) having a $60,000 FMV. The land has a $30,00 adjusted basis (for both tax and E&P purposes) to Red Corporation and is subject to an $8,000 mortgage, which R assumes. Assume a 34% marginal corporate tax rate.
a) What is the amount and character of the income Randy recognizes as a result of the distribution?
b) What is Randy's basis for the land?
c) What is the amount and character of Red Corporation's gain or loss as a result of the distribution?
d) What effect does the distribution have on Red Corporation's E&P?

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Definitions:

Filter Circuit

An electronic circuit designed to remove unwanted components of a signal, such as noise, or to select desired ranges of frequencies.

Opposition

In electrical terms, this refers to the resistance or impedance that a circuit presents to the flow of electric current.

T Filters

T filters are electronic filters consisting of two reactive elements separated by a resistor, forming a T shape, used in circuits to reduce noise or manipulate signal frequencies.

Bandwidth

The range of frequencies within a given band, particularly that used for transmitting a signal.