CSU, Inc., is a calendar year S corporation. CSU's Form 1120S shows nonseparately stated ordinary income of $120,000 for the year. Taewon owns 30% of the CSU stock throughout the year. The following information is obtained from the corporate records.

Tax-exempt interest income 4,500

Salary paid to Taewon (78,000)

Charitable contributions (9,000)

Dividends received from a non-U.S. corporation 7,500

Short-term capital loss (9,000)

Depreciation recapture income 16,500

Refund of prior state income taxes 7,500

Cost of goods sold ($108,000)

Long-term capital loss (10,500)

Administrative expenses (27,000)

Long-term capital gain 21,000

Selling expenses (16,500)

Taewon's beginning stock basis 48,000

Taewon's additional stock purchases 13,500

Beginning AAA 46,500

Taewon's loan to corporation 30,000

• Assume all facts remain the same and CSU distributes $400,000 total during the tax year to all shareholders proportionately. Show the effect, if any, of the distribution on Taewon's stock basis and ending AAA.
• Assume all facts remain the same and CSU had previously been a C corporation and had 60,000 of E&P. Show the effect, if any, of the distribution on Taewon's stock basis, ending AAA, ending E&P. Show also the taxability, if any, of the distribution to Taewon. HINT: calculate the allocation of AAA to Taewon for distribution computations, even though AAA is a corporate account.