Question

On September 30, Marsh Corporation, a calendar year taxpayer, sold a parcel of land (basis of...

On September 30, Marsh Corporation, a calendar year taxpayer, sold a parcel of land (basis of $320,000) for an $800,000 note. The note is payable in four installments, with the first payment due next year. Because Marsh did not elect out of the installment method, none of the $480,000 gain is taxed this year. Marsh Corporation had a $150,000 deficit in accumulated E & P at the beginning of the year. Before considering the effect of the land sale, Marsh had a deficit balance in current E & P of $75,000.

Mary, the sole shareholder of Marsh, has a basis of $350,000 in her stock. If Marsh distributes $750,000 to Mary on December 31, how much income must she report for tax purposes?

Mary reports a $_______ taxable dividend and a return of capital of $________ After the distribution, Mary's stock basis is $_________

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