Purple Corporation makes a property distribution to its sole shareholder, Paul. The property distributed is a house (fair market value of $189,000; basis of $154,000) that is subject to a $245,000 mortgage that Paul assumes. Before considering the consequences of the distribution, Purple's current E & P is $35,000 and its accumulated E & P is $140,000. Purple makes no other distributions during the current year. What is Purple's taxable gain on the distribution of the house?
A. $0
B. $21,000
C. $35,000
D. $91,000
E. None of the above
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