Cavalier Corporation had current and accumulated E&P of $500,000 at December 31 20X3. On December 31, the company made a distribution of land to its sole shareholder, Tom Jefferson. The land's fair market value was $200,000 and its tax and E&P basis to Cavalier was $50,000. The tax consequences of the distribution to Cavalier in 20X3 would be:
A. No gain recognized and a reduction in E&P of $50,000.
B. No gain recognized and a reduction in E&P of $200,000.
C. $150,000 gain recognized and a reduction in E&P of $50,000.
D. $150,000 gain recognized and a reduction in E&P of $200,000.
Answer: D
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a. 43,200 units b. 9,900 units c. 26,182 units d. 20,000 units
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Answer the following statement true (T) or false (F)
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