F Corporation distributed to its sole shareholder land worth $50,000.The land had a basis of $40,000 and was subject to a mortgage of $20,000.F must decrease its E&P by $30,000.

Question

Quizplus · Accepted Answer

F Corporation must decrease its E&P by the fair market value of the land ($50,000) minus its basis ($40,000), resulting in a $10,000 decrease, not $30,000. The mortgage does not directly affect the E&P calculation in this context.

F Corporation Distributed to Its Sole Shareholder Land Worth $50,000