Rust Corporation Distributes Property to Its Sole Shareholder, Andre

question 65

Multiple Choice

Rust Corporation distributes property to its sole shareholder, Andre. The property has a fair market value of $350,000, an adjusted basis of $205,000, and is subject to a liability of $220,000. Current E & P is $500,000. With respect to the distribution, which of the following statements is correct?

• A) Rust has a gain of $15,000 and Andre has dividend income of $350,000.
• B) Rust has a gain of $145,000 and Andre's basis in the distributed property is $130,000.
• C) Rust has a gain of $130,000 and Andre's basis in the distributed property is $350,000.
• D) Rust has a gain of $145,000 and Andre has dividend income of $130,000.
• E) None of these.

---

Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced.

Volume of Business

The total amount of trade or transactions conducted by a company over a specified period, often measured in sales or units sold.

Attractive Location

pertains to a site or place with qualities that are appealing to businesses, investors, or residents, often due to factors like economic opportunities, natural beauty, or favorable conditions.

Composite Score

An overall score derived from combining several individual scores, often used in assessments or evaluations.