LO.6, 7, 8 Money, Inc., a calendar year S corporation in Denton, Texas, has two unrelated shareholders, each owning 50% of the stock. Both shareholders have a $400,000 stock basis as of January 1, 2012. At the beginning of 2012, Money has an AAA of

$300,000 and AEP of $600,000. During 2012, Money has operating income of $100,000.

At the end of the year, Money distributes securities worth $1 million, with an adjusted basis of $800,000. Determine the tax effects of these transactions.