Samuel is the sole shareholder of Small, Inc. (an S-corporation). Small, Inc. elected S-Corporation status in 2015 after 10 years of operation as a C-corporation. As of December 31, 2020, Small, Inc. had a positive balance in AEP (accumulated earnings and profits) of $15,000 and a positive balance in AAA (accumulated adjustments account) of $10,000. On January 1, 2021, Small, Inc. distributed property to Samuel with a fair market value of $80,000 and an adjusted basis of $20,000. Samuels stock basis in Small, Inc. (prior to the distribution) was $160,000. Samuel is in the 37% tax bracket and does not have any capital gain or losses.

a. Determine the tax consequences to Samuel from this distribution.

b. What is Samuels ending stock basis?

c. What are the tax consequences to Small, Inc. in making this distribution to Samuel?

4. In the above scenarios, John, Carol and Samuel each received a distribution of property from their respective business entities. In all three cases, the property had a fair market value of $80,000 and an adjusted basis of $20,000. Does the distribution of this property have the same tax consequences to John, Carol, and Samuel? If not, why not?