Distributed land to an individual shareholder

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Reference no: EM13186844

FG Inc. distributed land to an individual shareholder in a nonliquidating distribution. On the date the land was distributed, EFG Inc.'s adjusted basis in the land was $20,000, the fair market value of the land was $75,000, and the land was encumbered by a $35,000 mortgage, which liability was assumed by the shareholder. The corporation's earnings and profits were $300,000 when it distributed the land. As a result of the distribution, the amount of dividend income to the shareholder, and the shareholder's basis in the distributed property, are as follow:

a. Dividend income of $20,000 and basis of $20,000.
b. Dividend income of $40,000 and basis of $20,000.
c. Dividend income of $40,000 and basis of $40,000.
d. Dividend income of $40,000 and basis of $75,000.

Reference no: EM13186844

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