Wineseller Corporation is owned by Mortimer Smith, its sole shareholder. Mortimer has a $20,000 basis in his Wineseller Corporation stock. Mortimer is in the 37% tax bracket. Wineseller Corporation is in the 21% tax bracket.

Wineseller Corporation has the following balances as of December 31, 2021.

• Accumulated Earnings and Profits (AEP) ($600,000)
• Current Earnings and Profits $ 70,000

On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer.

3. Use the facts in part a, but assume that rather than cash, Mortimer received an asset with a fair market value of $200,000 and a basis to the corporation of $120,000.
   • How much tax would Mortimer owe from this distribution?
   • What are the tax implications to Wineseller Corporation?