Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 year 1. 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 year 1 would be:

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

Answer rating: 100% (QA)

Solution As the Balance in the Accumulated earnings and profits is large enough we ... View the full answer