Exercise 5-20 (Algorithmic) (LO. 5)

Fargo Corporation distributes property (basis of $697,200 and fair market value of $836,640) to a shareholder. Fargo Corporation has sufficient E & P for its distributions.

What are the tax consequences of this distribution to Fargo?

Fargo Corporation recognizes a (gain/loss) of $(fill in the blank).

The net (decrease/increase) to Fargo's E & P is $(fill in the blank). The shareholder has dividend income of $(fill in the blank).