Collettes S Corporation has a small amount of accumulated earnings and profits (AEP), requiring the use of the more complex distribution rules. Collettes accountant tells her that this AEP forces the maintenance of the AAA figures each year. Assume you are the S Corporations accountant and do the following:

a. Draft a letter to your client, identifying any relevant tax issues Collette faces. b. Offer any advice that you feel might be important to consider.