On May 10 of the current? year, Bethel Corporation distributes to its shareholder Carol $ 10,000 in cash and land? (a capital? asset) having a $ 78,000 FMV. The land has a $ 26,000 adjusted basis? (for both taxable income and? E&P purposes) and is subject to a $ 90,000 mortgage, which Carol assumes. Bethel has an? E&P balance exceeding the amount distributed and is subject to a? 34% marginal corporate tax rate.
A. What are the amount and character of the income Carol recognizes as a result of the distribution?
B. What is Carol’s basis in the land?
C. What are the amount and character of Bethel’s gain or loss as a result of the distribution?