This year Bobcat Company reports current E&P of negative $300,000 that accrued evenly throughout the year. At

Question:

This year Bobcat Company reports current E&P of negative $300,000 that accrued evenly throughout the year. At the beginning of the year,Bobcat’s accumulated E&P was a $200,000. Bobcat distributed $200,000 to its sole shareholder, Melanie Rushmore, on June 30 of this year. Melanie’s tax basis in her Bobcat stock was $75,000.

a. How much of the $200,000 distribution is treated as a dividend to Melanie?

b. What is Melanie’s tax basis in her Bobcat stock after the distribution?

c. What is Bobcat’s balance in accumulated E&P on the first day of next year?

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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