1.What is Sparrow Corps current year E&P?

Taxable income $5,000

Federal income taxes paid 100

Municipal bond interest received 200

Non deductible portion of donation 300

Premiums paid on CEOs life insurance 400

Life insurance proceeds received when CEO died 500

Lobby expenses 600

2.

On Jan 1, 2013, calendar year taxpayer, Amber Corp, has accumulated E&P of $10,000 and

On June 1, 2013, Amber Corp distributes $20,000 to its sole shareholder Bonnie (30% ordinary income tax rate; 20% dividend income tax rate) whose basis in her Amber stock is $1,000 and she earned in $30,000 as a teacher

1.For tax purposes, how is the $20,000 distribution to Bonnie characterized (i.e., the amount of the distribution that is a dividend to Bonnie, reduces Bonnies Amber stock basis to zero and is taxable as ordinary income)

2.Based on your answer above, calculate the amount of taxes Bonnie has to pay