G Corporation distributed its own bonds to its shareholders as a dividend.The bonds had a face value of $100,000.However, because the interest rate on the bonds at the date of issue was below the market rate of interest, the bonds were worth $90,000.G must reduce its E&P by $90,000.

Question

Quizplus · Accepted Answer

When a corporation distributes property, including its own bonds, as a dividend, its E&P is reduced by the fair market value of the property distributed. In this case, the fair market value of the bonds was $90,000, so G must reduce its E&P by that amount.

G Corporation Distributed Its Own Bonds to Its Shareholders as a Dividend.The