Tar Heel Corporation had current and accumulated E&P of $$520,000$ at December $3120$X$3.$ On December $31,$ the company made a distribution of land to its sole shareholder, William Roy. The land's fair market value was $$120,000$ and its tax and E&P adjusted tax basis to Tar Heel was $$27,000.$ William assumed a mortgage attached to the land of $$11,000.$ The tax consequences of the distribution to William in $20$X$3$ would be:

Multiple Choice

Dividend of $$109,000$ and an adjusted tax basis in the land of $$109,000.$

$$120,000$ dividend and an adjusted tax basis in the land of $$120,000.$

$$120,000$ dividend and an adjusted tax basis in the land of $$109,000.$

Dividend of $$109,000$ and an adjusted tax basis in the land of $$120,000.$