A Corporation Distributes Land and the Related Liability to Meg

question 20

Multiple Choice

A corporation distributes land and the related liability to Meg, its sole shareholder. The land has an FMV of $60,000 and is subject to a liability of $70,000. The corporation has current and accumulated E&P of $80,000. The corporation's adjusted basis for the property is $70,000. What effect does the transaction have on the corporation?

• A)A recognized loss of $10,000; its E&P is reduced by $70,000.
• B)A recognized loss of $10,000; its E&P is unchanged.
• C)No recognized gain or loss; its E&P is reduced by $60,000.
• D)No recognized gain or loss; its E&P is unchanged by the distribution.

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Definitions:

Cephalopods

Cephalopods are a class of mollusks that include creatures such as squids, octopuses, cuttlefish, and nautiluses, known for their bilateral body symmetry, prominent head, and set of arms or tentacles.

Digestive Tract

A complex series of organs and glands responsible for the digestion and absorption of nutrients, elimination of waste, and food transportation.

Symmetrical Body Plan

A layout of an organism's body parts in a balanced distribution around a central line or point, allowing for the division into mirror-like halves.

Tissues

Groups of cells in an organism that have similar structure and function.