1-Nesbitt Corporation has 142,000 shares of common stock outstanding and pays quarterly dividends of $0.33 per share. At the beginning of the currentyear, the balance in its accumulatedE&P account is $35,000.

Requirement

Nesbitt would like to have sufficientE&P to pay its dividends in the current year. To doso, what minimum amount ofE&P must the corporation generate in the currentyear?

2-On May 10 of the currentyear, Addison Corporation distributes to its shareholder Debra $14,000 in cash and land(a capitalasset) having a $90,000 FMV. The land has a $14,000 adjusted basis(for both taxable income andE&P purposes) and is subject to a $95,000 mortgage, which Debra assumes. Addison has anE&P balance exceeding the amount distributed and is subject to a 21% corporate tax rate.

a. What are the amount and character of the income Debra recognizes as a result of thedistribution?

b. What is Debra's basis in theland?

c. What are the amount and character of Addison's gain or loss as a result of thedistribution?