A tract of land is distributed to Martha Moore as a dividend. Its basis immediately prior to the distribution was $40,000, its value is $80,000, and it is subject to a mortgage of $55,000. The following statements concerning the distribution are all false except:

		E&P is increased by $15,000 (liability less basis), decreased by $40,000 and increased by the liability.
		The net adjustment to the E&P account is $40,000, the amount of the realized gain.
		The distributing corporation's realized gain of $40,000 is recognized to the extent of the $15,000.
		The shareholder's basis in the land is $80,000, its fair market value.