Owl Corporation makes a nonliquidating distribution of property having a $40,000 adjusted bases and a $100,000 FMV to its sole Shareholder, Brownie.

Owl has current and accumulated E&P of $150,000. The property distributed is subject to a $40,000 mortgage, which Brownie assumes. Brownies basis in his Owl stock at the time of the distribution is $20,000.

What are the income tax consequences to Brownie and to Owl Corporation of the distribution (gain, loss, basis, E&P)? Support your answer with authority from the tax code.