Better Pools, Inc. distributed land with a basis of $20,000, a value of $75,000, subject to a liability of $35,000 to a noncorporate shareholder when its E&P was $300,000. As a result of the distribution, the amount of the dividend and the shareholder's basis in the distributed property are as follows:

Provide computation.

(1.) Dividend: $40,000; basis: $40,000

(2.) Dividend: $20,000; basis: $20,000

(3.) Dividend: $40,000; basis: $20,000

(4.) Dividend: $40,000; basis: $75,000