Money, Inc., a calendar year S corporation, has one shareholder, Tom. Tom has a basis of $600,000 in Money stock as of January 1. Moneys beginning balance in the AAA is $500,000 and it has E&P from C years of $600,000. During the year Money generates operating income of $100,000. At the end of the year, Money distributes securities worth $1,000,000, with an adjusted basis of $800,000 to Tom.

a. What effect do these transactions have on the AAA? Be sure to also adjust Toms A/B for the transactions as well.

b. How is Toms distribution treated for tax purposes? (i.e. what is nontaxable from AAA, what is taxable dividend from E&P?)

c. What is Toms A/B in the Money stock after the distribution?