LO.1, 2, 3, 4 Cerulean Corporation has two equal shareholders, Eloise and Olivia. Eloise I S SUE ID acquired her Cerulean stock three years ago by transferring property worth $700,000, basis of $300,000, for 70 shares of the stock. Olivia acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000, basis of $110,000.

Cerulean Corporation’s accumulated E & P as of January 1 of the current year is

$350,000.

On March 1 of the current year, the corporation distributed to Eloise property worth $120,000, basis to Cerulean of $50,000. It distributed cash of $220,000 to Olivia. On July 1 of the current year, Olivia sold her stock to Magnus for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Magnus and Eloise.

What are the tax issues?