Catamount Company had current and accumulated E&P of $500,000 at December 31,year 1.On December 31,the company made a distribution of land to its sole shareholder,Caroline West.The land's fair market value was $200,000 and its tax and E&P basis to Catamount was $250,000.The tax consequences of the distribution to Catamount in year 1 would be:
A)No loss recognized and a reduction in E&P of $250,000.
B)$50,000 loss recognized and a reduction in E&P of $250,000.
C)$50,000 loss recognized and a reduction in E&P of $150,000.
D)No loss recognized and a reduction in E&P of $200,000.

Question

Quizplus · Accepted Answer

The distribution of land to a shareholder is a non-taxable event to the corporation. The corporation's E&P is reduced by the amount of the E&P basis of the property distributed, which is $250,000.

Catamount Company Had Current and Accumulated E&P of $500,000 at December