Part II

During 2023, Cudgel made several changes to its business approach and reported $18,000 of business income, computed as follows:

Sales Revenue $208,000

Cost of goods sold (90,000)

Salary to Regula (45,000)

Salary to Leonel (45,000)

Marketing expense (10,000)

Business income $18,000

• Cudgel also reported a long-term capital gain of $24,000 in 2023.

• Cudgel made a cash distribution on July 1, 2023, of $20,000 to each shareholder.

? What amount of gain/income does each shareholder recognize from the cash distribution on July 1, 2023?

Prepare a Form 1120-S for Cudgel for 2023