Blue Corporation distributes land and building having a $70,000 adjusted basis and a $200,000 FMV to its sole shareholder, Marina. Blue has current and accumulated E&P exceeding $200,000. The property is subject to a $120,000 mortgage, which Marina assumes. What is the amount of the taxable dividend received by Marina?
A) $0
B) $70,000
C) $80,000
D) $130,000
C) $80,000
The amount distributed to Marina is $80,000 ($200,000 FMV - $120,000 liability). Marina has a $80,000 taxable dividend because the corporation has sufficient E&P. Marina's basis in the real estate is its $200,000 FMV.
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