Wills Corporation, Which Has Accumulated a Current E&P Totaling $65,000

question 71

Multiple Choice

Wills Corporation, which has accumulated a current E&P totaling $65,000, distributes land to its sole shareholder, an individual. The land has an FMV of $75,000 and an adjusted basis of $55,000. The shareholder assumes a $15,000 liability associated with the land. The shareholder will recognize

• A)$60,000 of dividend income and have a $60,000 basis in the land.
• B)$65,000 of dividend income and have a $75,000 basis in the land.
• C)$60,000 of dividend income and have a $75,000 basis in the land.
• D)$65,000 of dividend income and have a $65,000 basis in the land.

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Definitions:

Revenue Expenditures

Payments made for ordinary maintenance of an asset or unnecessary or unreasonable situations.

Plant Assets

Long-term tangible assets used in the production of goods or services.

Capital Expenditures

Original cost of an asset as well as additions or enlargements, extraordinary repairs, and betterments.

Budgeting

The process of creating a plan to spend your money, allocating future income towards expenses, savings, and debt repayment.