Sparrow corporation is a calendar year taxpayer capital


Sparrow Corporation is a calendar year taxpayer. At the beginning of the current year, Sparrow has accumulated E & P of $83600. The corporation incurs a deficit in current E & P of $117,040 that accrues ratably throughout the year. On June 30, Sparrow distributes $50,160 to its sole shareholder, Libby. If Libby's stock has a basis of $8,360 how is she taxed on the distribution?

Taxable dividend income in the amount of $_______

Tax-free recovery of basis in the amount of $_________

Capital gains in the amount of $________

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Financial Management: Sparrow corporation is a calendar year taxpayer capital
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