Tar Heell Inc. pays $100,000 of dividends in 2019, with $25,000 going to your client, Mr. Big. Tar Heel began 2019 with $120,000 in accumulated E&P and had $10,000 of current E&P in 2019. Mr. Big has a $40,000 basis in his Tar Heel stock.

a. How much dividend income will Br. Big report from Tar Heel in 2019? What will Mr. Bigs basis in Tax Heel be after the dividend?

b. Assume instead that Tar Heel began 2019 with a $2,000 deficit balance in its E&P account but did have $10,000 of current E&P for 2019. How much dividend income will Mr. Big report from Tar Heel in 2019?