Tar Heel Corporation Had Current and Accumulated E&P of $500,000

question 31

Multiple Choice

Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3. On December 31, the company made a distribution of land to its sole shareholder, William Roy. The land's fair market value was $100,000 and its tax and E&P basis to Tar Heel was $25,000. William assumed a mortgage attached to the land of $10,000. The tax consequences of the distribution to William in 20X3 would be:

• A)$100,000 dividend and a tax basis in the land of $100,000.
• B)$100,000 dividend and a tax basis in the land of $90,000.
• C)Dividend of $90,000 and a tax basis in the land of $100,000.
• D)Dividend of $90,000 and a tax basis in the land of $90,000.

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Definitions:

Monopoly

Monopoly refers to a market structure where a single company or entity exclusively supplies a particular product or service, inhibiting competition.

Perfect Price Discrimination

A pricing strategy where a seller charges the maximum price that each consumer is willing to pay, thus capturing the entire consumer surplus.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved, leading to an under or overallocation of resources.

Pay-per-view

A television service allowing viewers to purchase events to be viewed on a private telecast at home.