Digger Corporation Has $50,000 of Current and Accumulated E&P

question 43

Essay

Digger Corporation has $50,000 of current and accumulated E&P. On March 1, Digger distributes land with a $30,000 FMV and a $17,500 adjusted basis to Dave, its sole shareholder. The land is subject to a $5,000 liability which Dave assumes.
a)What are the amount and character of the distribution?
b)What is Dave's basis in the property?
c)When does his holding period for the property begin?

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Definitions:

Ambiguity

The presence of vagueness or uncertainty in meaning, often found in language, text, or legislation, leading to multiple possible interpretations.

Devise

In a will, a gift of real property.

Real Property

Property that includes the soil and any permanently bound fixtures to it, like constructions and arboreal elements.

Bequest

A gift left to someone in a will.