Suppose Jay Corporation was a closely held company with accumulated E&P of $300,000 and current E&P of $350,000. Mutt and Jeff are related; both have a 50% stake in Jay Corporation and share management responsibilities equally. What are the tax consequences of each of the following independent transactions involving Jay Corporation, Mutt, and Jeff? How can each transaction affect Jay Corporation's E&P? Jay Corporation sells an office building (adjusted basis of $350,000, FMV of $300,000) to Mutt for $275,000. Jay Corporation lends Jeff $250,000 on March of this year. The loan is evidenced by a note and is payable on demand. No interest is charged to the loan (current applicable FED interest rate is 7%). Jay Corporation owns a plane that it leases for a specified rental rate. Mutt and Jeff also use the plane for personal use and pay no rent. During the year, Mutt used the plane for 120 hours, and Jeff used it for 160 hours. The rental value of the plane is about $350 per hour, and its maintenance costs average $80 per hour. Mutt leases equipment to Jay Corporation for $20,000 per year. The same equipment can be leased from another company for $9,000 per year