How will the distribution be taxed

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Reference no: EM133335596

Assignment:

1. Erica Summers is the sole shareholder of an S Corporation. At the beginning of the current year, her stock basis was $15,000, the AAA was $10,000 and "C" year E&P was $30,000. During the year, the corporation sold appreciated property for its current FMV (A/B $50,000; FMV $80,000). After the sale, the corporation distributed $90,000 to Erica. The corporation reported non-separately-stated income of $25,000 for the year.

2. How will the distribution be taxed? (i.e. what comes from the AAA, what is return of basis and what is dividend? What is Erica's ending basis?

3. How will the distribution be taxed if Erica makes the bypass election and takes the distribution first from the E&P? What is the ending AAA balance? What is Erica's ending basis?

Reference no: EM133335596

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