1) Bob forms a corporation for his shoe cobbling business "Shoes R Us" ("SR Corp"). SR Corp in its first year has $100k earnings and profits (who thought cobbling could do this???). Bob owns all 1,000 shares of SR Corp. Bob has a basis in his shares of $50k. SR Corp distributes to Bob $200k at the end of year 1.
-What are the tax ramifications to Bob?
-What are the tax ramifications to SR Corp?
2) Jill forms T corporation and it has -$500k of accumulated E and P, but $50k of current E and P. T corp distributes $100k to Jill in the current year. Jill has $25k basis in the stock.
-What are the tax ramifications to Jill?
-What are the tax ramifications to T corp?
3) Z corp has one class of shares, and good old Billy owns all 1,000 of them. He has a stock basis of $10,000 ($10/share) that he acquired on January 1, 2012. On January 20, 2014 Z does a 2/1 stock split, thus distributing 1,000 new shares to Billy.
-What are the tax ramifications to Billy?
-What are the tax ramifications to Z corp?