On January 1, Tulip Corporation (a calendar year taxpayer) has accumulated E & P of $400,000. Its current E & P for the year is $120,000 (before considering dividend distributions). On the last day of the year, Tulip distributes $600,000 ($150,000 each) to its four equal shareholders, Anne, Andrew, Tom and Terry. Anne has a basis in her stock of $65,000, while Andrews basis is $120,000. Tom has a $5,000 basis in his stick while Terry has a $80,000 basis.

What is the effect of the distribution (i.e. how much dividend income does each have? What is their basis in Tulip Corp stock after receiving the distribution? Are their any other consequences to any of the shareholders beyond dividend and return of capital treatment? If so, how much?)

Anne?

Andrew?

Tom?

Terry?