Catamount Company Had Current and Accumulated E&P of $505,000 at December

question 39

Multiple Choice

Catamount Company had current and accumulated E&P of $505,000 at December 31, 20X3. On December 31, the company made a distribution of land to its sole shareholder, Caroline West. The land's fair market value was $205,000 and its tax and E&P basis to Catamount was $252,500. The tax consequences of the distribution to Catamount in 20X3 would be:

• A) No loss recognized and a reduction in E&P of $252,500.
• B) $47,500 loss recognized and a reduction in E&P of $252,500.
• C) $47,500 loss recognized and a reduction in E&P of $157,500.
• D) No loss recognized and a reduction in E&P of $205,000.

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Definitions:

Proliferate

To increase rapidly in numbers; multiply.

Infancy

The period in a human's life from birth to the age of two, characterized by rapid growth and development.

Adulthood

A developmental stage characterized by full physical growth, maturity, and the assumption of adult roles and responsibilities.

Cerebral Hemisphere

The cerebral hemispheres are the two halves of the brain, responsible for controlling opposite sides of the body and different aspects of cognitive processing.