Tall Corporation (an S-corporation) has AAA of $16,000 and AEP of $8,000 .Tall Corp. distributes $20,000 of cash to its Henry, the sole shareholder. Henrys basis in his S Corp stock before the distribution is $40,000. Henry is in the 37% tax bracket. 1. What are the tax consequences to Henry as a result of this distribution?

2. What is ending balance in AAA and AEP. What is Henry's ending stock basis?