Jayhawk Company reports current E&P of $317,500 and accumulated E&P of negative $295,000. Jayhawk distributed $480,000 to its sole shareholder, Christine Rock, on the last day of the year. Christine’s tax basis in her Jayhawk stock is $99,250.
a. How much of the $480,000 distribution is treated as a dividend to Christine?
b. What is Christine’s tax basis in her Jayhawk stock after the distribution?
c. What is Jayhawk’s balance in accumulated E&P on the first day of next year?