Wills Corporation, Which Has Accumulated a Current E&P Totaling $70,000

question 60

Multiple Choice

Wills Corporation, which has accumulated a current E&P totaling $70,000, distributes land to its sole shareholder, an individual. The land has an FMV of $75,000 and an adjusted basis of $60,000. The shareholder assumes a $15,000 liability associated with the land. The transaction will have the following tax consequences.

• A)The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $75,000.
• B)The corporation will recognize no gain; the shareholder will recognize dividend income of $75,000.
• C)The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $60,000.
• D)The corporation will recognize no gain; the shareholder will recognize dividend income of $60,000.

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Definitions:

Incorporate

The process of legally declaring a business as a separate entity from its owners, providing legal protections and benefits.

Management By Objectives (MBO)

Is a process of joint objective‐setting between a manager and a staff member.

External Supervisory Control

Oversight conducted by external bodies or regulators to ensure an organization meets standards or regulations.

Relationship Building

The process of establishing and maintaining positive connections with others, often characterized by trust, understanding, and cooperation.