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

Multiple Choice

Paladin 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, Maria Mendez. The land's fair market value was $200,000 and its tax and E&P basis to Paladin was $250,000. Maria assumed a liability of $25,000 attached to the land. The tax consequences of the distribution to Paladin in 20X3 would be:

A) No loss recognized and a reduction in E&P of $200,000.
B) $50,000 loss recognized and a reduction in E&P of $200,000.
C) $50,000 loss recognized and a reduction in E&P of $225,000.
D) No loss recognized and a reduction in E&P of $225,000.