I:17-61 S Corporation Distributions and Stock Basis. Control Corporation distributes $11,000 cash to shareholder Craig whose stock basis is $8,000 before this year’s income or the distribution. Craig’s share of ordinary income for the current year is $1,000, and the corporation has no separately stated items. Control always has been an S corporation.

a. What are the tax consequences of the distribution (i.e., amount and character of income or gain to Control and Craig)?

b. What is Craig’s stock basis at the end of the tax year?