Fact pattern for questions 17 and 18 happy inc

Reference no: EM13593690

Fact Pattern for Questions 17 and 18. Happy Inc. is a calendar year corporation. Happy Inc. had no accumulated earnings and profits, but had $100,000 of current earnings and profits in 2012. On December 31, 2012, Happy Inc. distributed a total of $160,000 to its two equal shareholders, Betty and Bob. On the date of the cash distribution, Betty's basis in her Happy Inc. stock was $10,000 and Bob's basis in his Happy Inc. stock was $30,000.

1. How much does Betty include in her gross income for the current taxable year with respect to the distribution to her?

a. $50,000 dividend income and $10 capital gain.

b. $80,000 dividend income and 0 capital gain.

c. $0 dividend income and $70,000 capital gain.

d. $50,000 dividend income and $20,000 capital gain.

2.What is Bob's adjusted basis in his EFG Inc. stock after the distribution?

a. 0.

b. $5,000.

c. $15,000.

d. none of the above.

Reference no: EM13593690

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