Clarington Corporation, a calendar year taxpayer, had two shareholders, Adam and Eve. Adam owns 40 percent and Eve 60 percent of the corporation's stock. In each of the following situations, determine how the dividends will be taxed to Adam and Eve and if the corporation has any tax consequences.

Adam Basis

1. Clarington has $20,000 in CE&P and $10,000 in AE&P. It distributed $15,000 cash to Adam and Eve on July 1.
2. Clarington has $20,000 in CE&P and $10,000 in AE&P. It distributed $25,000 cash to Adam and Eve on July 1.
3. Clarington has $20,000 in CE&P and $10,000 in AE&P. It distributed $35,000 cash to Adam and Eve on July 1.
4. Clarington has $20,000 in CE&P and $10,000 in AE&P. It distributed $15,000 cash to Adam and Eve on June1 and $15,000 on December 1.
5. Clarington has a $5,000 deficit in CE&P and $10,000 in AE&P. It distributed $10,000 cash to Adam and Eve on July 1.
6. Clarington has $10,000 in CE&P and a $5,000 deficit in AE&P. It distributed $10,000 cash to Adam and Eve on July 1.
7. Clarington has ABC stock valued at $8,000 with a basis of $4,000 that it distributes pro rata to Adam and Eve on July 1. CE&P is $4,000 and its AE&P is $3,500.
8. Clarington has XYZ stock valued at $8,000 with a basis of $10,000 that it distributes pro rata to Adam and Eve on July 1. CE&P is $4,000 and its AE&P is $3,000.