16. Cavalier Corporation had current and accumulated E&P of $500,000 at December
ID: 2478824 • Letter: 1
Question
16. 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 $200,000
B. $150,000 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. No gain recognized and a reduction in E&P of $50,000
Explanation / Answer
Answer
B. $150,000 gain recognized and a reduction in E&P of $200,000
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