How will mike and steve be taxed on the distributions

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Reference no: EM13273278

Mike, the sole shareholder of Daffodil Corporation, sold his Daffodil stock to Steve on July 30 for $ 200,000.

Mike's basis in the stock was $ 150,000 at the beginning of the year.

Daffodil had accumulated E & P of $ 110,000 on January 1 and current E & P of $ 170,000.

During the year, Daffodil made the following distributions:
$ 300,000 cash to Mike on July 1 and
$ 100,000 cash to Steve on December 30.

How will Mike and Steve be taxed on the distributions?

How much gain will Mike recognize on the sale of his stock to Steve?

 

Reference no: EM13273278

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