JJB Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result, it has a deficit in accumulated E & P at the beginning of the year of $100,000. This year, however, JJB earned a significant profit; taxable income was $100,000. Taxable income accrued ratably during the year. Consequently, JJB made one cash distributions to Jeff, its sole shareholder: $200,000. The following information might be relevant to determining the tax treatment of the distribution.

This years taxable income of $100,000. There was a total of $20,000 in meals and entertainment during the year.

The corporations Federal income tax liability is $75,000 for the year. This amount was paid during the year.

JJB paid nondeductible fines of $50,000. The company also paid nondeductible life insurance premiums of $10,000.

The company sold a piece of equipment during the year and reported a regular tax 1231 gain of $100,000. Using the E&P cost basis the gain was $70,000.

E&P depreciation exceeds MACRS depreciation by $85,000.

In addition, an election under 179 was made this year for $25,000 of assets (the Sec 179 related to 5 year property).

a. Compute JJBs E & P for the year.

b. What are the tax consequences of the distribution made on July 1 to Jeff (his stock basis is $15,000)?