A owns half the common stock of X with an adjusted basis of $40, and Y owns the other half of the X common stock with an adjusted basis of $100. Xs current E&P from current-year income and expenses/losses is $94, and X has no accumulated E&P. X uses the accrual method, all taxpayers are on the calendar year, and 1059 does not apply. Assume that the corporate tax rate is 34 percent.

X distributes, in kind, its long-held AT&T stock with an adjusted basis of $40 and FMV of $100 to Y; X also distributes other long-held AT&T shares With an adjusted basis of $60 and FMV of $100 to A. Suppose that each block of AT&T stock was subject to a $50 non-recourse liability. What are the results to A, Y,and X?