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9. Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $400,000 at the...

9. Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $400,000 at the beginning of the year. On July 1, she sells all of her stock for $2 million to Matt (1 million) and Brody (1 million) . On January 1, Hawk has accumulated E & P of $180,000 and during the year, current E & P of $320,000. Hawk makes the following cash distributions: $270,000 to Ashley on March 31, $180,000 to Matt on October1 and $180,000 to Brody on December 1. Use the format below; to (1) determine how the distributions are taxed to Ashley, Matt and Brody? (2)Ashley’s recognized gain on the 7/1 sale to Matt and Brody?

             Current year                                     Accumulated

                   E&P                                                   E&P                                           Distributions

   

Ashley’s Basis 400,000 at the beginning of the year

             

Div. Inc.                          Ret. of Cap                         Basis                          Cap. Gains

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