Problem $23-26($LO$.6,7)$

On January $1,2023,$ Kinney, Inc., an S corporation, reports $$4,000$ of accumulated E & P and

a balance of $$10,000$ in AAA. Kinney has two shareholders, Erin and Frank, each of whom

owns $500$ shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the

year is $$5,000.$

Kinney distributes $$6,000$ to each shareholder on July $1,$ and it distributes another $$3,000$ to

each shareholder on December $21.$

How are the shareholders taxed on the distributions? Ignore the $20\%$ QBI deduction.

Round any division to five decimal places. If required, round final answers to the

nearest dollar.

Erin and Frank each report $

dividend income for the July $1$ distribution and $

each for the December $21$ distribution. Assuming that the shareholders have

sufficient basis in their stock, Erin and Frank each receive a tax$-$free $

distribution from AAA.

ONLY NEED HIGHLIGHTED BOX. THANKS!