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X Inc. has beginning accumulated E&P of $10,000 and current E&P deficit for the year of...

X Inc. has beginning accumulated E&P of $10,000 and current E&P deficit for the year of ($9,000). The corporation makes a cash distribution on the last day of the tax year of $7,000 to the sole shareholder. The shareholders stock basis before the distribution was $4,000.  

find the following:

1. amount of taxable dividend

2. non-taxable return of capital

3. recognized capital gain

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Answers are highlighted in yellow: Solution: Lower of (10000-9000) or $7,000 1) Amount of Taxable Dividends 1,000 Non-taxable

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