WOOK Problem 12-28 (LO. 6, 7) On January 1, 2021, Kinney, Inc., an 5 corporation, reports $4,000 of accumulated E & P and a balance of $10,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year Is $5,000. Kinney distributes $6,000 to each shareholder on July 3, and it distributes another $3,000 to each shareholder on December 21 How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction, Round any division to five decimal places. If required, round final answers to the nearest dollar. Erin and Frank each reports 1,000 dividend Income for the July 1 distribution and s 500 each for the December 21 distribution. Assuming that the shareholders have sufficient basis in their stock, Erin and Frank each receive a tax-free 10,000 X distribution from AAA Feed Che My Wor The amount of any distribution to an s corporation shareholder is equal to the cash plus the fair market value of any other property distributed. How the distribution is taxed depends upon whether the corporation has c corporation accumulated earnings and profits (AEP). The AAA provides a midhanism to ensure that the earnings of an corporation are taxed to shareholders only once