Problem
In the current year, Union Corporation has $300,000 of current and accumulated earnings and profits. The corporation distributes land with a FMV of $100,000 to Clara, its sole shareholder. The land has an adjusted basis of $40,000 to Union Corporation and is subject to a $30,000 mortgage which Clara assumes.
1. What is the amount of the dividend distributed to Clara?
2. What is Clara's adjusted basis in the land distributed to her?
3. What is the amount, if any, of gain or loss recognized to Union Corporation as a result of the distribution?
4. What is the effect of the distribution on the E&P of the corporation?