Identify which of the following statements is true.
A)The FMV of an obligation is used to determine the E&P reduction when a corporation distributes the obligation to its shareholders.
B)When appreciated property is distributed to shareholders, E&P must be increased by any gain (net of taxes)recognized due to the property distribution.
C)When appreciated property is distributed in a nonliquidating distribution, the net effect on the distributing corporation's E&P is that it is reduced by the net of the FMV of the property distributed minus the gain (net of federal income taxes)recognized due to the property distribution.
D)Only B and C above are true.

Question

Quizplus · Accepted Answer

Statement B is true because E&P must be increased by the gain recognized on the distribution of appreciated property. Statement C is true because the E&P is reduced by the FMV of the property minus the gain recognized, net of taxes.

Identify Which of the Following Statements Is True