Nancy is the sole shareholder of Indigo Corporation. The basis of her stock is $90,000. Indigo...
Nancy is the sole shareholder of Indigo Corporation. The basis of her stock is $90,000. Indigo distributes $230,000 to Nancy in 20X8. Earnings and profits for Indigo are $60,000. What are the tax consequences of the distribution to Nancy?
Taxable Dividend Decrease in Stock Basis Capital Gain
a. $90,000 $80,000 $60,000
b. $80,000 $90,000 $60,000
C. $90,000 $60,000 $80,000
d. $60,000 $90,000 $80,000
e. None of the above
Homework Answers
total distribution 230000
up to taxable dividend = 60000
up to decrease in stock basis = 90000
remaining capital gain = 80000
Option D.
Total Distribution is first settled against taxable dividend, then up to stock basis, then remaining is capital gain.
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