Cavalier Corporation Had Current and Accumulated E&P of $500,000 at December

Multiple Choice

Cavalier Corporation had current and accumulated E&P of $500,000 at December 31, year 1.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 year 1 would be (assume a 0 percent marginal tax rate for Cavalier) :

A) No gain recognized and a reduction in E&P of $200,000.
B) $150,000 tax and E&P gain recognized and a reduction in E&P of $200,000.
C) $150,000 tax and E&P gain recognized and a reduction in E&P of $50,000.
D) No gain recognized and a reduction in E&P of $50,000.