Starling Corp. distributes property to its sole shareholder, Zoe. The property has a fair market value of $350,000, an adjusted basis of $205,000, and is subject to a liability of $220,000. Current E&P is $500,000. With respect to the distribution, which of the following statements is correct?
a. Starling has a gain of $15,000 and Zoe has dividends
income of $350,000
b. Starling has a gain of $145,000, and Zoe's adjusted basis in the distributed property is $130,000
c. Straling has a gain of $130,000 and Zoe's basis in the distributed property is $350,000
d. Straling has a gain of $145,000 and Zoe has dividend income of $130,000