Question

1. Susan is the sole shareholder in Square, Inc. This year, Square, Inc. has accumulated earnings and profits of $25,000. Susan's basis for the stock she owns in the company is $7,000. Square, Inc makes a distribution of $40,000 to Susan. How much of this distribution is taxable to Susan as dividends? How much of this distribution is taxable to Susan as a capital gain?

2. On November 20, 2018, Dylan purchased stock in Tech, Inc. for $10,000. On October 31, 2019, the stock became worthless. How should Dylan treat the loss in 2019 (i.e. long-term or short-term, capital gain or loss)?

Answer 1

Ans 1-	Dividend Income- $25000.00
	(Dividend are distributed from total balance accumulated profit)
	Capital Gain= $15000
	(balance part of total distributed Income = $40000.00 - $25000.00 = $15000.00 )
Ans-2	Due to worthless of value of share we can not consider its capital loss.
	capital gain or loss only consider at the time of sale.