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.

What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation?

1. How would your answer above be different if instead Wineseller Corporation had the following balances:
   • Accumulated Earnings and Profits (AEP) $500,000
   • Current Earnings and Profits (480,000)

Assume that Mortimer still receives a distribution of $160,000 and has stock basis of $20,000