QUESTION 7 A corporation sells property (basis of $175,000) to its sole shareholder for S125,000, the fair market value of the property. With respect to the sale, The shareholder has a basis of $175,000 in the property. The corporation has a tax loss or $50,000 The corporation does not recognize a tax loss but reduces its E& P account S50,000 The sharcholder has a constructive dividend of S50,000. Nose of the above. QUESTION Assume taxable income is the starting point for computing E&P. During 2010, Sagittarius Corporation had a capital loss of $60,000 and a capital gain of $30,000. The net capital loss of $30,000 could not be deducted in arriving at Sagittarius's taxable income for 2010. The $30,000 was carried over to 2011 and fully deducted in that year The excoss capital loss has no effect on Sagittarius Corporations E&P in 2011 The excess capital loss reduces Sagittarius Coporation's E&P for 2011 The excess capital loss of $30,000 would reduce Sagittarius Corporation's E & P in 2010. The excess capital loss increases Sagittarias Corporation's E&P for 2010 Nose of the above