Purple Corporation Makes a Property Distribution to Its Sole Shareholder

Multiple Choice

Purple Corporation makes a property distribution to its sole shareholder, Kyung. The property distributed is a house (fair market value of $189,000; basis of $154,000) that is subject to a $245,000 mortgage that Kyung assumes. Before considering the consequences of the distribution, Purple's current E & P is $35,000 and its accumulated E & P is $140,000. Purple makes no other distributions during the current year. What is Purple's taxable gain on the distribution of the house?

A) $0
B) $21,000
C) $35,000
D) $91,000
E) None of these.