Sam owns 20% of CCC Corporation stock. Four others own 20% each too. CCC sells diamonds to retail jewelry businesses. While CCC has a deficit in accumulated E & P DEFICIT of $(256,000) at the beginning of the year, its current E & P is $400,000. Since the company had a successful year, CCC pays a $50,000 CASH distribution to each of the companys four shareholders, other than Sam, on December 31. INSTEAD of CASH, CCC distributes a diamond (adjusted basis of $80,000 and a fair market value of $50,000) to Sam.

Determine the effect of distributing the diamond on CCCs taxable income Line 30 of Form 1120, and on Sams adjusted gross income on his Form 1040?

What is Sams basis in the diamond?

Was the distribution good tax planning on the part of CCC CORP? Why or why not?