Question

Core Corporation reported current earnings and profits of $250,000. Core distributed a building with an adjusted basis of $170,000 and a fair market value of $230,000 to its sole shareholder. The building had a mortgage of $90,000, which the shareholder will assume. What is the amount of the dividend received by the shareholder?

A. $80,000.
B. $140,000.
C. $230,000.
D. $250,000.

Answer 1

B. $140,000

Step-by-step explanation:

The total cost of acquiring an asset, including the installation, commission, transportation and other relevant fees is known as adjusted basis. The fair market value is the value an asset would yield when sold. It is an amount that would be received in return when an asset is sold.

Therefore, the shareholders would receive dividend at the fair market value adjusted for the mortgage balance

= $230,000 - $90,000

= $140,000