Rust Corporation Distributes Property to Its Sole Shareholder, Andre

question 167

Multiple Choice

Rust Corporation distributes property to its sole shareholder, Andre. The property has a fair market value of $350,000, an adjusted basis of $205,000, and is subject to a liability of $220,000. Current E & P is $500,000. With respect to the distribution, which of the following statements is correct?

• A) Rust has a gain of $15,000 and Andre has dividend income of $350,000.
• B) Rust has a gain of $145,000 and Andre's basis in the distributed property is $130,000.
• C) Rust has a gain of $130,000 and Andre's basis in the distributed property is $350,000.
• D) Rust has a gain of $145,000 and Andre has dividend income of $130,000.
• E) None of the above.

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Definitions:

Bits

Basic units of data in computing, representing a logical state with values of either 0 or 1.

Vehicle ECU

The Electronic Control Unit in a vehicle, which is a central computer responsible for managing and controlling the car's engine and other systems.

Arithmetic and Logic Processing

The fundamental operations carried out by a computer processor to perform mathematical and logical operations.

CPU

A central processing unit, which serves as the primary component of a computer responsible for interpreting and executing instructions.