Hello. I have a question pertaining to this problem. For part b, can you explain why the adjustment for E&P gain on distribution of land is 0? I'm confused because, for part a, the gain on distribution of land is $50,000.

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Volunteer Corporation reported taxable income of $500,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The lands fair market value was $75,000 and its tax and E&P basis to Volunteer was $25,000. Rocky assumed a mortgage attached to the land of $15,000. Any gain from the distribution will be taxed at 21 percent. The company had accumulated E&P of $750,000 at the beginning of the year.

a. Compute Volunteers taxable income and federal income tax.

Taxable income from operations$500,000

Gain on distribution of land ($75,000 - $25,000) 50,000

Total taxable income$550,000Federal income tax ($550,000 x 21%)$115,500

b.Compute Volunteers current E&P.

Taxable income$550,000

Subtract: Federal income tax(115,500)

Adjustment for E&P gain on distribution of land( 0)

Current E&P$434,500