1. FSU Corp. is a calendar year taxpayer. Daisy owns all of the stock of FSU Corp, which has a basis of $15,000. On April 1 of the current year, FSU Corp. distributes $35,000 cash to Daisy. On October 1 of the current year, FSU Corp distributes an additional $45,000 cash to Daisy.

Instructions:

Determine Daisys tax treatment of each the IRC Sec. 301 non-liquidating distributions received under the following independent scenarios. Assume that the April 1 and October 1 distributions to Daisy are the only distributions made by FSU Corp. during the current year. Note: E&P is an abbreviation for earnings and profits. Use the space provided below each scenario for any supporting calculations.

1. FSUs Current E&P: $8,000; WVUs Accumulated E&P: $50,000
2. FSUs Current E&P: $(24,000); WVUs Accumulated E&P: $33,000 (Assume that the current deficit is not earmarked to a particular period during the year.)