Swan Corporation Makes a Property Distribution to Its Sole Shareholder

question 120

Multiple Choice

Swan Corporation makes a property distribution to its sole shareholder, Matthew. The property distributed is a cottage (fair market value of $135,000; basis of $110,000) that is subject to a $175,000 mortgage that Matthew assumes.Before considering the consequences of the distribution, Swan's current E & P is $25,000 and its accumulated E & P is 100,000. Swan makes no other distributions during the current year. What is Swan's taxable gain on the distribution of the cottage?

• A)$0.
• B)$15,000.
• C)$25,000.
• D)$65,000.
• E)None of the above.

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