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Determine the allocation of the distributions

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Problem - On January 1 of the current year, Rhondell Corporation has accumulated E & P of $13,000. Current E & P for the year is $84,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $42,000 ($21,000 to Elizabeth and $21,000 to Jonathan) on April 30 and a total of $58,000 ($29,000 to Jonathan and $29,000 to Marshall) on December 31.

Required - Determine the allocation of the distributions. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital.

Reference no: EM132645630

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