This year, Sooner Company reports current E&P of negative $424,000. Its accumulated E&P at the beginning of the year was $354,000. Sooner distributed $708,000 to its sole shareholder, Boomer Wells, on June 30 of this year. Boomers tax basis in his Sooner stock is $122,500.

a. How much of the $708,000 distribution is treated as a dividend to Boomer?

Dividend $142,000

b. What is Boomers tax basis in his Sooner stock after the distribution?

Tax basis $0

c. What is Sooners balance in accumulated E&P on the first day of next year?

Balance in accumulated E & P $