Problem 1 (3 points): Wildcat Corp, a calendar year taxpayer, sold a
parcel of land in Manhattan, KS for a $250,000 promissory note on
September 1st of the current year. Wildcat had a basis of $100,000
in the land. The note is payable in five installments with the first
payment due next year. Because Wildcat did not elect out of the
installment method, none of the $150,000 gain is taxed this year.
Wildcat had a deficit in accumulated e & p of $75,000 at the
beginning of the year. Before considering the effect of the land
sale, Wildcat had a deficit in current e & p of $12,500.
Klein, the sole shareholder of Wildcat, has a basis of $50,000 in his
stock. If Wildcat distributes $225,000 to Klein on December 31st,
how much income will Klein report for tax purposes?