NDP Inc., a C corporation with $60,000 in accumulated earnings and profits (AE&P) at the end of last year, elected to become an S corporation at the beginning of the current tax year. At the end of the current tax year, NDP has $40,000 in the accumulated adjustments account (AAA), $15,000 in the other adjustments account (OAA), and $60,000 in the accumulated earnings and profits (AE&P) account before any distributions of $15,000 to each of its 50% shareholders. No election has been made relating to the source of distributions.

This is a two-part question.

Question 1: What is the remaining balance in AE&P for NDP Inc. after making the cash distributions to its shareholders?

Question 2: What amount of these distributions is taxable to the shareholders?

a) $30,000; $30,000

b) $60,000; $ 0

c) $45,000; $15,000

d) $40,000; $20,000