At the beginning of the current year Ohio Corporation has a $40,000 accumulated E&P balance and a

Question:

At the beginning of the current year Ohio Corporation has a $40,000 accumulated E&P balance and a $73,000 current E&P deficit. The corporation distributes $60,000 cash to its sole shareholder on May 5. The shareholder’s tax basis in her Ohio stock at the beginning of the year is $325,000.
a. What amount of the $60,000 distribution is taxable as a dividend (assume a ratable allocation of the deficit)?
b. What are the amount and character of any nondividend distributions to the shareholder?
c. What is the amount of Ohio’s accumulated E&P balance (deficit) on the last day of the year?

Corporation
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