Question
Exit Corporation has accumulated E&P of $44,000 at the beginning of the current tax year and no current E&P. During the year, the corporation makes
Exit Corporation has accumulated E&P of $44,000 at the beginning of the current tax year and no current E&P. During the year, the corporation makes the following distributions to its sole shareholder who has a $22,000 basis for her stock.
The treatment of the $15,000 August 1 distribution would be
| Date | Amount Distributed |
| April 1 | $20,000 |
| June 1 | 19,000 |
| August 1 | 15,000 |
| $15,000 is taxable as a dividend; $5,000 from current E&P and the balance from accumulated E&P.
$15,000 is taxable as a dividend from accumulated E&P.
$4,000 is taxable as a dividend from accumulated E&P, and $11,000 is tax-free as a return of capital.
$5,000 is taxable as a dividend from current E&P, and $10,000 is tax-free as a return of capital.
|
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