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News Corporation, a calendar year S corporation, has an accumulated adjustments account (AAA) of $8000. It also has accumulated earnings and profits of $12,000. The

News Corporation, a calendar year S corporation, has an accumulated adjustments account (AAA) of $8000. It also has accumulated earnings and profits of $12,000. The sole shareholder, Rupert, receives a $27,000 cash distribution from the corporation.

a) How will this distribution be treated in regard to Rupert if his basis in the stock is $13,000?

b) Calculate Ruperts basis for his stock after the distribution.

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