Tar Heel Corporation Had Current and Accumulated E&P of $570,000

question 63

Multiple Choice

Tar Heel Corporation had current and accumulated E&P of $570,000 at December 31 20X3. On December 31, the company made a distribution of land to its sole shareholder, William Roy. The land's fair market value was $170,000 and its tax and E&P basis to Tar Heel was $32,000. William assumed a mortgage attached to the land of $13,500. The tax consequences of the distribution to William in 20X3 would be:

• A) $170,000 dividend and a tax basis in the land of $170,000.
• B) $170,000 dividend and a tax basis in the land of $156,500.
• C) Dividend of $156,500 and a tax basis in the land of $170,000.
• D) Dividend of $156,500 and a tax basis in the land of $156,500.

---

Definitions:

Inductive Reactance

A measure of the opposition by an inductor to changes in current, dependent on frequency.

Inductance

A property of an electrical conductor by which a change in current in the conductor induces an electromotive force in both the conductor itself and in any nearby conductors by mutual inductance.

Voltage Drop

Voltage drop is the reduction in electrical potential across a component or conductor in an electrical circuit as current flows through it.

RLC Series Circuit

An RLC series circuit is an electrical circuit consisting of a resistor (R), an inductor (L), and a capacitor (C) connected in series, exhibiting both resistive and reactive properties.