Puffin Corporation makes a property distribution to its sole shareholder, Bonnie. The property distributed is a car (basis of $30,000; fair market value of $20,000) that is subject to a $6,000 liability which Bonnie assumes. Puffin has no accumulated E & P and $30,000 of current E & P from other sources during the year. What is Puffin’s E & P after taking into account the distribution of the car?

The Earnings and Profits (E&P) of a corporation are important in tax calculations related to distributions to shareholders. E&P is used to determine the tax treatment of distributions.

Given the scenario:

• Puffin Corporation has no accumulated E&P and $30,000 of current E&P from other sources during the year.
• The property distributed is a car with a basis of $30,000 and a fair market value of $20,000. It's subject to a $6,000 liability assumed by Bonnie.

When a corporation makes a property distribution with a fair market value lower than its adjusted basis, it's considered as a distribution with no gain or loss recognized for tax purposes.

The corporation's E&P will decrease by the amount of the liability assumed by the shareholder. Therefore, after taking into account the distribution of the car and the liability assumed by Bonnie, Puffin's E&P will decrease by $6,000.

So, after the distribution of the car and accounting for the liability, Puffin's E&P would be $24,000 ($30,000 - $6,000).