Kathryn, an individual, own all of the outstanding stock in Copper Corporation. Kathryn purchased her stock in Copper 11 years ago, and her basis is $18,000. At the beginning of this year, the corporation has $38,000 of accumulated E &P and no current E&P (before considering the effect of the distributions. What are the tax consequences to Kathryn (amount and type of income and basis in property received) and Copper Corporation (gain or loss and effect on E&P)in each of the following situations?
a. Copper distributions land to Kathryn. The land was held as an investment and haas a fair market value of $28,000 and an adjusted basis of $21,000>
b. Assume that Copper Corporation has no current or accumulated E&P prior to the distribution. How would you answer to (a) change?
c. Assume that the land distributed in (a) is subject to a $23,000 mortgage (which Kathryn assumes). How would your answer change?
d. Assume that the land has a fair market value of $28,000 and an adjusted basis of $31,000 on the date of the distribution. How would your answer to (a) change?
e. Instead of distributing land, assume that Copper decides to distribute furniture used in its business. The furniture has a $7,000 fair market value, a $600 adjusted basis for income tax purposes, and a $2,600 adjusted basis for E&P purposes. when the furniture was purchased four years ago, its original fair market value was $9,000.