Badger Corporation had $64,000 of earnings and profits before accounting for the following distributions to its sole shareholder:

Cash $25,000

Real Estate: Adjusted basis 70,000

Real Estate: Fair market value 98,000

Real Estate: Subject to a mortgage of 40,000

The shareholder assumes the $40,000 mortgage on the property. Without considering Federal income taxes, what is the net reduction to Badgers earnings and profits?

a. $55,000

b. $28,000

c. $68,000

d. $64,000

e. None of the above.

(Please explain)