How is the distribution treated for tax purposes


At the start of the current year, Red Corporation (a calendar year taxpayer) has accumulated E & P of $100,000. Red's current E & P is $60,000, and during the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Michele and Wally. Michele's stock has a basis of $11,000 and Wally's stock has a basis of $26,000. How is the distribution treated for tax purposes?

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Accounting Basics: How is the distribution treated for tax purposes
Reference No:- TGS099528

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