9. LO.1, 3 At the start of the current year, Blue Corporation (a calendar year taxpayer) holds...

Question:

9. LO.1, 3 At the start of the current year, Blue Corporation (a calendar year taxpayer)

holds accumulated E & P of $100,000. Blue’s current E & P is $60,000. At the end of the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Pam and Jon. Their basis in the stock is $11,000 for Pam and $26,000 for Jon. How is the distribution treated for tax purposes?

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