Lark Corp. distributes land with a fair market value of $80,000 and an adjusted basis of $55,000, to its shareholder, Hal. The land is subject to a liability of $34,000. Assume that Lark has sufficient Earnings and Profits that any distribution to Hal will be taxable as a dividend to him.

Required: Answer the following questions.

1. How much dividend income will Hal have to report on his tax return for the current year? What will be Hal's basis in the land?
2. What effect, if any, will the distribution have on Lark's taxable income?
3. What effect(s) will the distribution have on Lark's E & P?