Cavalier Corporation Had Current and Accumulated E&P of $500,000 at December

question 64

Multiple Choice

Cavalier Corporation had current and accumulated E&P of $500,000 at December 31 20X3. On December 31, the company made a distribution of land to its sole shareholder, Tom Jefferson. The land's fair market value was $200,000 and its tax and E&P basis to Cavalier was $50,000. The tax consequences of the distribution to Cavalier in 20X3 would be:

• A)No gain recognized and a reduction in E&P of $200,000.
• B)$150,000 gain recognized and a reduction in E&P of $200,000.
• C)$150,000 gain recognized and a reduction in E&P of $50,000.
• D)No gain recognized and a reduction in E&P of $50,000.

---

Definitions:

HNO3

Nitric acid, a highly corrosive and toxic strong acid used in the manufacture of fertilizers and explosives.

D-Tagatose

A ketohexose sugar related to fructose that has potential health benefits and is used as a low-calorie sweetener.

Keto-Enol Tautomerization

A chemical equilibrium between a ketone and its corresponding enol (a compound with a double bond and a hydroxyl group connected to the same carbon), highlighting the mobility of hydrogen and electrons.

D-Glucose

A naturally occurring form of glucose, a simple sugar, that is widely found in nature and is a primary energy source for living organisms.