On January 1, 20x2, Preston owned all of the outstanding stock of BIG Corporation.Her adjusted basis in the stock was $20,000.

During 20x2, BIG has earnings & profits of $20,000, and Preston received distributions from BIG in the amount of $220,000.As of December 31, 20x1, BIG Corp had accumulated earnings & profits of $150,000.

What is the amount and character of income Preston must recognize in 20x2?

a.$170,000 dividend

$30,000 gain

b.$200,000 dividend

c.$220,000 dividend

d.$170,000 dividend

$50,000 gain

Question 2

A taxpayer owns 100 shares of stock with a basis of $1,000.The shares are sold for $925.Taxpayer then purchases 100 shares of substantially identical stock 15 days later for $850.

What is the taxpayer's basis in the new shares?

a.$925

b.$850

c.$1,000

d.$1,075