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Non-liquidating Distributions
Corporation is a calendar year taxpayer. Pete owns one-third (100 shares) of Pink stock. His
basis in the stock is $25,000. Cheryl owns two-thirds (200 shares) of Pink stock. Her basis in the
stock is $40,000. On June 10 of the current year, Pink distributes $40,000 to Pete and $80,000 to
Cheryl.
a. Determine the tax consequences (dividend income, return of capital, and/ or capital gain) of
the cash distributions to Pete and Cheryl as well as the remaining stock basis if current E&P is
$60,000 and accumulated E&P is $100,000.
b. Determine the tax consequences (dividend income, return of capital, and/ or capital gain) of
the cash distributions to Pete and Cheryl if current E&P is $36,000 and accumulated E&P is
$30,000.

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Non-liquidating DistributionsCorporation is a calendar year taxpay.pdf

  • 1. Non-liquidating Distributions Corporation is a calendar year taxpayer. Pete owns one-third (100 shares) of Pink stock. His basis in the stock is $25,000. Cheryl owns two-thirds (200 shares) of Pink stock. Her basis in the stock is $40,000. On June 10 of the current year, Pink distributes $40,000 to Pete and $80,000 to Cheryl. a. Determine the tax consequences (dividend income, return of capital, and/ or capital gain) of the cash distributions to Pete and Cheryl as well as the remaining stock basis if current E&P is $60,000 and accumulated E&P is $100,000. b. Determine the tax consequences (dividend income, return of capital, and/ or capital gain) of the cash distributions to Pete and Cheryl if current E&P is $36,000 and accumulated E&P is $30,000.