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:

Skull

The bony structure forming the head, protecting the brain and supporting the structures of the face.

Monthly

Pertaining to or occurring every month.

Auscultation

The medical practice of listening to the internal sounds of the body, typically using a stethoscope, to assess the condition of heart, lungs, or other organs.

Heel-to-shin

A neurological test involving running the heel of one foot down the shin of the opposite leg, testing coordination and motor function.