Determine pearl stock at the end of the year


Consequences of Multiple Cash Distributions. At the beginning of the current (non-leap) year, Charles owns all of Pearl Corporation's outstanding stock. His basis in the stock is $80,000. On July 1, he sells all his stock to Donald for $125,000. During the year Pearl, a calender year taxpayer, makes two cash distributions: 6,000 on March 1 to Charles and $90,000 on September 1 to Donald. How are these distributions treated in the following independent situations? What are the amount and character of Charles' gain on his sale of stock to Donald? What is Donald's basis in his Pearl stock at the end of the year?

a. Current E&P of $40,000; accumulated E&P of $30,000

b. Current E&P of $100,000; accumulated E&P (deficit) of ($50,000).

c. Current E&P (deficit) of $36,500);accumulated E&P of $120,000

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Accounting Basics: Determine pearl stock at the end of the year
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