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1) Moe Corporation is a calendar year taxpayer. At the beginning of the current year, Moe has accumulated E & P of $33,000. The corporation incurs a deficit in current E & P of $46,000 that accrues ratably throughout the year.  On June 30, Moe distributes $20,000 to its sole shareholder, Larry.  If Larry’s stock has a basis of $4,000, how is he taxed on the distribution?

 

 

2) At the beginning of the year, Kathryn Corporation had accumulated E & P of $225,000. On March 30, Kathryn sold an asset at a loss of $225,000.  For the calendar year, Kathryn incurred a deficit in current E & P of $305,000, which includes the $225,000 loss on the sale of the asset.  If Kathryn made a distribution of $50,000 to its sole shareholder Gramps on April 1, how will Gramps be taxed?

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