Navy 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, Troy. The land is subject to a liability of $55,000 that Troy assumes. Troy has:

Question

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The taxable dividend is $15,000, calculated as the fair market value of the land ($70,000) minus the liability assumed ($55,000). This is because dividends are generally calculated based on the net value received by the shareholder.

Navy Corporation Has E & P of $240,000