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A tract of land is distributed to Martha Moore as a dividend. Its basis immediately...

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Accounting

A tract of land is distributed to Martha Moore as a dividend. Its basis immediately prior to the distribution was $40,000, its value is $80,000, and it is subject to a mortgage of $55,000. The following statements concerning the distribution are all false except:

E&P is increased by $15,000 (liability less basis), decreased by $40,000 and increased by the liability.

The net adjustment to the E&P account is $40,000, the amount of the realized gain.

The distributing corporation's realized gain of $40,000 is recognized to the extent of the $15,000.

The shareholder's basis in the land is $80,000, its fair market value.

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