Jack owns 100% stock of Verizon Inc. His basis in the stock is $24,000. Verizon had...
Jack owns 100% stock of Verizon Inc. His basis in the stock is $24,000. Verizon had $36,000 accumulated E&P. During the current year Verizon has negative E&P of $32,000. On April 1 Verizon distributed $40,000 in cash to Jack. Only July 1 Jack sold half his Verizon stock to Joanne for $50,000.On December 31 Verizon distributed $20,000 cash to Jack and $20,000 cash to Joanne. How is the $20,000 December distribution to Jack for tax purposes?
a. $20,000 dividend
b. $20,000 reduction in basis
c. $20,000 gain
d. $12,000 reduction in basis, $8,000 gain
e. $12,000 dividend, $8,000 reduction in basis
f. $10,000 reduction in basis, $10,000 gain
g. $5,000 reduction in basis, $15,000 gain
H. $6,000 reduction in basis, $14,000 gain
i. none of the above.
Homework Answers
Solution: a.$20,000 Dividend.
Total Dividend is income and need not to be reduced from the basis.
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Jack owns 100% stock of Verizon Inc. His basis in the stock is
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