Tar Heel Corporation 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, William Roy. The land's fair market value was $100,000 and its tax and E&P basis to Tar Heel was $25,000. William assumed a mortgage attached to the land of $10,000. The tax consequences of the distribution to William in year 1 would be: A) Dividend of $90,000 and a tax basis in the land of $90,000. B) $100,000 dividend and a tax basis in the land of $100,000. C) $100,000 dividend and a tax basis in the land of $90,000. D) Dividend of $90,000 and a tax basis in the land of $100,000.

The tax consequences of the distribution to William in year 1 would be D. Dividend of $90,000 and a tax basis in the land of $100,000.

Explanation:

Provided data,

current and accumulated E&P of $500,000 at December 31 year 1.

The land's fair market value = $100,000 and

Tax and E&P basis to Tar Heel = $25,000.

Mortgage attached to the land = $10,000.

Dividend amount = fair market value - the liability assumed

= $100000 - $10000

= $90000

Tax basis in the land = the fair market value

= $100000

The tax consequences of the distribution to William in year 1 would be Dividend of $90,000 and a tax basis in the land of $100,000.

answer; 33,000;

i would say a penny hope it you