a. John would have a $50,000 dividend. Jamaica Corporation would reduce its E&P by $50,000.

b. John would have a $50,000 dividend and a $50,000 basis in the XYZ stock. Jamaica would recognize a $40,000 gain on the XYZ stock. Jamaicas E&P would be increased by $40,000 assuming taxable income basis and E&P basis are equal and reduced by the $8,400 ($40,000 x 0.21) of federal taxes on the gain and by the XYZ stocks $50,000 FMV, for a net reduction of $18,400 ($40,000 - $8,400 - $50,000). The disadvantage of this choice is that the corporation must recognize $40,000 and pay tax of $13,600 even though it has not sold the stock and has not received any cash.

c. John would have a dividend of $50,000 and a $50,000 basis in the ABC stock. Jamaicas E&P would be reduced by the $72,000 E&P adjusted basis of the stock to Jamaica. The disadvantage of this choice is that, if the stock is distributed to John, neither John nor Jamaica can ever take the $22,000 loss that Jamaica sustained on this stock before the distribution.

Please give me some specific reasons and background knowledge behind the answers a to c.

John owns all 100 shares of stock in Jamaica Corporation, which has $100,000 of current E&P. John would like to receive a $50,000 distribution from the corporation. Jamaica owns several assets that it could distribute to John. What are the tax consequences of Jamaica's distributing each of the following assets? Jamaica has a 21% tax rate and, un- less stated otherwise, its bases for E&P and taxable income purposes are the same. a. $50,000 cash. b. 100 shares of XYZ stock purchased two years ago for $10,000 and now worth $50,000. c. 100 shares of ABC stock purchased one year ago for $72,000 and now worth $50,000. d. Equipment purchased four years ago for $120,000 that now has a tax adjusted basis of $22,000 and an E&P adjusted basis of $40,000. John would assume a liability of $31,000 on the equipment. The equipment is now worth $81,000. c. An installment obligation with a face value of $50,000 and a basis of $32,000. Jamaica acquired this obligation three years ago when it sold land held as an investment. f. Would your answers in Parts a-c change if Jamaica redeems 50 of John's shares for cach of the properties listed? g. Based on the foregoing results, which distribution would you recommend? Which distribution(s) should be avoided? h. Would your answers in Parts a-e change if John's 100 shares represented one third of Jamaica's outstanding shares, unrelated parties owned the remaining 200 shares, and Jamaica exchanged all of John's shares for each of the properties listed? i. If John were an investor, would treating the distribution as a sale be preferable to treat- ing the distribution as a dividend? Why or why not