Fill in the blanks using the answer key below

Fillow Corporation acquires the assets of Grout Corporation in a valid Type C reorganization.Both corporations are calendar year taxpayers.The reorganization is completed on December 31^stof Year 1. At the beginning of Year 1, Filliow had $30,000 in accumulated earnings and profits whileGrout had a $50,000 deficit in accumulated earnings and profits.During Year 1,Fillow had $20,000 in current earnings and profits whileGrout broke even.

1. IfFillow distributes $20,000 to its shareholders on December 31^stof Year 1, they will recognize.
2. After distributing $20,000 to its shareholders in Year 1,Fillow then breaks even and distributes $10,000 to its shareholders in Year 2.Fillow's shareholders will recognize in Year 2.
3. After distributing $20,000 to its shareholders in Year 1, Fillow has current earnings and profits of $15,000 in Year 2 and breaks even in Year 3.Fillow makes no distributions in Year 2.On December 31^stof Year 3,Fillow distributes $45,000 to its shareholders.Fillow's shareholders will recognize in Year 3.

Answer Key

• a dividend of $10,000
• a return of capital of $10,000
• a dividend of $20,000
• a return of capital of $30,000
• a dividend of $30,000
• a return of capital of $30,000
• a dividend of $40,000
• a return of capital of $40,000.