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:

Object Permanence

The understanding that objects continue to exist even when they cannot be observed.

Eye Movements

The voluntary or involuntary motion of the eyes, which can indicate attention, intention, or cognitive processes.

Barrier

An obstacle that prevents movement or access from one place to another or impedes progress in achieving a goal.

Object Permanence

The understanding that objects continue to exist even when they cannot be seen, heard, or touched, typically developed in infancy.