In the current year, Pearl Corporation has $300,000 of current and accumulated E&P. On June 3, Pearl Corporation distributes a parcel of land (a capital asset)worth $120,000 to Betty, a shareholder. The land has a $60,000 adjusted basis to Pearl Corporation and is subject to a $16,000 mortgage, which Betty assumes. Assume a 34% marginal corporate tax rate.
a)What is the amount and character of the income recognized by Betty as a result of the distribution?
b)What is Betty's basis for the land?
c)What is the amount and character of Pearl's gain or loss as a result of the distribution?
d)What effect does the distribution have on Pearl's E&P?

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The Answer of In the current year, Pearl Corporation has $300,000 of current and accumulated E&P. On June 3, Pearl Corporation distributes a parcel of land (a capital asset)worth $120,000 to Betty, a shareholder. The land has a $60,000 adjusted basis to Pearl Corporation and is subject to a $16,000 mortgage, which Betty assumes. Assume a 34% marginal corporate tax rate.
a)What is the amount and character of the income recognized by Betty as a result of the distribution?
b)What is Betty's basis for the land?
c)What is the amount and character of Pearl's gain or loss as a result of the distribution?
d)What effect does the distribution have on Pearl's E&P?

In the Current Year, Pearl Corporation Has $300,000 of Current