Cavalier Corporation had current and accumulated E&P of $500,000 at December 3120X3. On December 31, the company made a distribution of land to its sole shareholder, Tom Jefferson. The land's fair market value was $200,000 and its tax and E&P basis to Cavalier was $50,000. The tax consequences of the distribution to Cavalier in 20X3 would be:

Question

Quizplus · Accepted Answer

Cavalier Corporation recognizes a gain of $150,000 ($200,000 FMV - $50,000 basis) on the distribution of land. The E&P is reduced by the FMV of the land, which is $200,000.

Cavalier Corporation Had Current and Accumulated E&P of $500,000 at December