Earning and profits at the end of the year


ABC Inc. had current earnings and profits of $50,000 when it distributed to an individual shareholder land that the corporation held as an investment. On the date the land was distributed, ABC Inc.'s adjusted basis in the land was $10,000, the fair market value of the land was $50,000, and the land was encumbered by a $30,000 mortgage, which liability was assumed by the shareholder. There were no other transactions that might affect ABC Inc.'s earnings and profits for the year. What was the amount of ABC Inc.'s earning and profits at the end of the year?

A. $30,000.

B. $50,000.

C. $60,000.

D. $70,000.

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Accounting Basics: Earning and profits at the end of the year
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