On January 1 of the current year, Black Corporation has accumulated E&P of $10,000. Current E&P for the year amounts to $30,000. Megan and Matt are sole equal shareholders of Black from January 1 to July 31 and each have basis of $15,000 in the shares. on August 1, Megan sells all of her stock to Helen for $20,000. Black makes two distributions to the shareholders during the year: $40,000 to Megan and Matt ($20,000 each) on July 1 and $40,000 to Matt and Helen ($20,000 each) on December 1. Current and accumulated E&P are applied to the two distributions as follows :

Question: What are the federal income tax consequences to each of Megan, Matt, and Helen for each of the transactions above?

Can someone explain to me how to get these numbers ? Thank You!

Current Accumulated Return of Answer: Distributions can be 1) Taxable dividend, then 2) Return of capital (to extent of basis), then 3) Capital gain Current E&P $15,000 $10,000$ 15,000 Accumulated Return of E&P July 1 distribution ($40,000) December 1 distribution ($40,000 15,000 25,000 Matt Megan Helen July 1 Dividend ROC Cap Gain Basis 12,500 7,500 12,500 7,500 7,500 7,500 August 1 Cap Gain/Loss Basis 12,500 20,000 Dec 1 Dividend ROC Cap Gain Basis 7,500 7,500 5,000 7,500 12,500 7,500 Current Accumulated Return of Answer: Distributions can be 1) Taxable dividend, then 2) Return of capital (to extent of basis), then 3) Capital gain Current E&P $15,000 $10,000$ 15,000 Accumulated Return of E&P July 1 distribution ($40,000) December 1 distribution ($40,000 15,000 25,000 Matt Megan Helen July 1 Dividend ROC Cap Gain Basis 12,500 7,500 12,500 7,500 7,500 7,500 August 1 Cap Gain/Loss Basis 12,500 20,000 Dec 1 Dividend ROC Cap Gain Basis 7,500 7,500 5,000 7,500 12,500 7,500