At the beginning of the year, Myrna Corporation (a calendar year taxpayer) has E & P of $66,050. The corporation generates no additional E & P during the year. On December 31, the corporation distributes $99,075 to its sole shareholder, Abby, whose stock basis is $19,815. How is the distribution treated for tax purposes?
If an amount is zero, enter "0". As a result the distribution Abby has the following:
• Dividend income: $
• Return of capital: $
• Capital gain: $
• Stock basis after the distribution: $
|• Dividend income||$ 66,050||Amount distributed as E&P|
|• Return of capital||$ 19,815||Distribution of cash in excess of E&P are treated as a return of shareholders` basis in the stock to an extent of stock basis.|
|• Capital gain||$ 13,210||Capital Gain=Corporation distribution-Dividend Income-Stock basis [99075-66050-19815]|
|• Stock basis after the distribution||$ -||As all the capital has been refunded through distribution, stock basis will become Zero.|
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