An S Corporation has four shareholders. The Corporation has land with a fair market value of $100,000 and a basis of $20,000. The corporation distributes the land in-kind to the four shareholders. Each shareholders' basis in the corporation is $1,000. Assume the corporation has always been an S. Assume also that the AAA balance prior to the property distribution is zero.

New assumption: same facts as above, except the corporation has accumulated E&P of $16,000

a. Each shareholder has a gain of $20,000

b. Each shareholder has a dividend of $4,000

c. Each shareholder has a gain of $20,000 and a dividend of $4,000

d. Each shareholder has no gain or loss until the property is sold.

e. None of the above.

Which one is the right answer and why?