Part 1:

Compare and contrast the corporate taxable income formula with the individual taxable income formula.

Part 2:

Z-Sisters Corporation has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows:

Shares

Lourdes Vick	400
Anita Vick (Lourdess daughter)	200
Liz Vick (Lourdess daughter)	200
Cat Labrillazo (unrelated)	200
Total	1000

Z-Sisters Corporation has current E&P of $300,000 for this year and accumulated E&P at January 1 of this year of $500,000.

During this year, the corporation made the following distributions to its shareholders:

03/31: Paid a dividend of $10/share to each shareholder ($10,000 in total).

06/30: Redeemed 200 shares of Lourdess stock for $200,000. Lourdess basis in the 200 shares redeemed was $100,000.

09/30: Redeemed 60 shares of Cats stock for $60,000. His basis in the 60 shares was $36,000.

12/31: Paid a dividend of $10/share to each shareholder ($7,400 in total).

• Determine the tax status of each distribution made this year. (Hint: First, consider if the redemptions are treated as dividend distributions or exchanges.)
• Compute the corporations accumulated E&P at January 1 of next year.
• Lourdes is considering retirement and would like to have the corporation redeem all of her shares for $100,000 plus a 10-year note with a fair market value of $300,000.
• What must Lourdes do or consider if she wants to ensure that the redemption will be treated as an exchange?
• Could Lourdes still act as a consultant to the company?
• Z-Sisters Corporation must pay attorneys fees of $5,000 to facilitate the stock redemptions. Is this fee deductible?

Assess the belongings to the United States, residential status is as a resident.