ABC Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result, it has a deficit in accumulated E & P at the beginning of the year of $100,000. This year, however, ABC earned a significant profit; taxable income was $250,000. Consequently, ABC made one cash distribution to Martha, its sole shareholder: at year end $225,000 December 31, and one asset distribution.

The asset is land with a basis of $50,000 and FMV of $80,000,

The following information might be relevant to determining the tax treatment of the distribution to Martha.

This years taxable income of $550,000. There was a total of $60,000 in meals and $10,000 in entertainment during the year.

The corporations Federal income tax liability is $70,000 for the year. This amount was paid during the year.

ABC paid nondeductible of $50,000. The company also paid nondeductible life insurance premiums of $10,000.

The company sold a piece of equipment during the year and reported a 1231 gain of $100,000. Using the E&P costs basis, the gain was $60,000

E & P depreciation exceeds MACRS depreciation by $100,000. In addition, an election under 179 was made this year for $50,000 of assets.

a. Compute Pebble's E & P for the year.

b. What are the tax consequences of the distributions made on Dec 31 to Martha (her stock basis is $50,000)?

c. Thinking about the land distribution: is there anyway to get the land to Martha without triggering income tax at the corporate level?