Distributions. A C corporation began the year with E& P of $12,000. During the year it added $8,000 of E& P before making any distributions for the year. The corporation has one shareholder, whose basis in the stock prior to any distributions for the year was $9,000.

a. Describe the tax consequences to both the corporation and the shareholder if the corporation distributes $24,000 cash during the year.

b. Same as in Part a., except that the corporation distributes $34,000 cash.