stributed $10,000 to Terry, its sole shareholder, on May 1, 2022. Terry’s stock basis in Cane Corporation, before adjusting for the 2022 distribution, was $8,000. Cane Corporation had a deficit in accumulated E & P of $15,000 on January 1, 2022. Cane Corporation had a $5,000 loss as of December 31, 2022 (incurred evenly throughout the year). Based on this information, Terry will report: a. Dividend income of $2,000 and $8,000 return of capital b
stributed $10,000 to Terry, its sole shareholder, on May 1, 2022. Terry’s stock basis in Cane Corporation, before adjusting for the 2022 distribution, was $8,000. Cane Corporation had a deficit in accumulated E & P of $15,000 on January 1, 2022. Cane Corporation had a $5,000 loss as of December 31, 2022 (incurred evenly throughout the year). Based on this information, Terry will report: a. Dividend income of $2,000 and $8,000 return of capital b
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 37P
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Cane Corporation distributed $10,000 to Terry, its sole shareholder, on May 1, 2022. Terry’s stock basis in Cane Corporation, before adjusting for the 2022 distribution, was $8,000. Cane Corporation had a deficit in accumulated E & P of $15,000 on January 1, 2022. Cane Corporation had a $5,000 loss as of December 31, 2022 (incurred evenly throughout the year). Based on this information, Terry will report:
a. Dividend income of $2,000 and $8,000 return of capital
b. Return of capital of $2,000 and $8,000 dividend income.
c. Dividend income of $5,000 and return of capital of $5,000.
d. Dividend income of $10,000 and capital gain of zero.
e. None of the above.
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