Question
On April 1, Delta Corporation distributes $120,000 in cash to each of its two equal shareholders, Sarach and Matt. At the time of the distribution,
On April 1, Delta Corporation distributes $120,000 in cash to each of its two equal shareholders, Sarach and Matt. At the time of the distribution, Delta's E&P is $160,000. Sarah's basis in her stock is $50,000 and Matt's basis is $20,000. How are these distributions characterized to Sarah and Matt? Please be specific and use chart provided below.
| Sarah | Matt | Total | |
|---|---|---|---|
| Distribution | $120,000 | $120,000 | $240,000 |
| Dividend income | |||
| Remaining distribution | |||
| Return of capital | |||
| Capital gain |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Study Guide To Accompany Financial Accounting In An Economic Context
Authors: Jamie Pratt
6th Edition
0471731110, 978-0471731115
