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What is the effect of the distribution by cotton candy

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Question: On January 1, Cotton Candy Corporation (a calendar year taxpayer) has accumulated E & P of $500,000. Its current E & P is $140,000 (before considering a dividend distribution). At the end of the year, Cotton Candy distributes $840,000 ($420,000 each) to its equal shareholders, Mary and Larry. Mary has a basis in her stock of $105,000, while Larry's basis is $150,000. What is the effect of the distribution by Cotton Candy Corporation to Mary and Larry?

Reference no: EM133553327

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