ABC Corporation has E & P of $240,000. It distributes land with a fair market value of $70,000 (adjusted basis of $25,000) to its sole shareholder, Paul. The land is subject to a liability of $55,000 that Paul assumes. Paul has: A

a. Taxable dividend of $15,000.

b. A taxable dividend of $25,000.

c. A taxable dividend of $45,000.

d. A taxable dividend of $70,000.

e. A basis in the machinery of $55,000

Question

Business

Humberto Lucas

15 May, 02:49

ABC Corporation has E & P of $240,000. It distributes land with a fair market value of $70,000 (adjusted basis of $25,000) to its sole shareholder, Paul. The land is subject to a liability of $55,000 that Paul assumes. Paul has: A

a. Taxable dividend of $15,000.

b. A taxable dividend of $25,000.

c. A taxable dividend of $45,000.

d. A taxable dividend of $70,000.

e. A basis in the machinery of $55,000

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Answers (1)

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Campbell Durham · Answer 1

Answer: Paul has a taxable dividend of $15,000.

Explanation:

From the question, we are informed that ABC Corporation has E & P of $240,000 and distributes land with a fair market value of $70,000 (adjusted basis of $25,000) to its sole shareholder, Paul. We are further informed that the land is subject to a liability of $55,000.

The taxable dividend will be the difference between the fair market value of land and the liability on the land. This will be:

= $70,000 - $55,000

= $15,000

Therefore, Paul has a taxable dividend of $15,000.