Part I.

Complete the following schedule for each independent case. For each distribution, how much would be treated as a dividend, return of capital, and capital gain?

Assume all distribution occur on the last day of the year. In all cases, the shareholder has a stock basis of $100,000 prior to any distribution.

Case	Accumulated Earnings & Profits	Current Earnings & Profits	Distribution of cash (at year end)	Dividends	Return of Capital	Capital gain
A	$500,000	$200,000	$350,000
B	$(1,250,000)	$100,000	$350,000
C	$800,000	$(600,000)	$400,000
D	$(100,000)	$(300,000)	$150,000

Part II.

Assume that in case B, the shareholder is Bella, an individual in the 37% tax bracket. In addition, you can assume that Bella does not have any other capital transactions in the past. What is Bellas income tax liability from this distribution of $350,000? Part III.

Fred is the sole shareholder of Barney, Inc, a C corporation. At the end of the year, Barney, Inc. has accumulated earnings & profits of $(300,000) and current earnings and profits of $(2,000). Fred says to you (his tax accountant), Since the corporation does not have any positive E&P, Id like a distribution since there couldnt be a dividend. However, I know we dont have any enough cash, so, lets distribute that land Barney, Inc. purchased three years ago for $30,000. I know I can sell it for $100,000.

Explain to Fred the tax consequences of distributing the land. (Assume that Fred, an individual, is in the 37% bracket.)