Respuesta :
Shareholder basis would then reduce by non-taxable portion of distribution to $250,000 each. If the amount is distributed then each shareholder would have dividend income of $200,000
Since the AAA account is at the company level, it may have a negative balance. It would be reasonable to suppose that in this situation, distributions would come first from the AAA account, then from the current E&P, and last from the shareholder's equity basis.
M would recognize gain of $200,000 ($1,000,000-$800,000) for securities distributed which would increase AAA by $200,000 which would flow to each shareholder and thus increase their basis by $100,000 as they own 50% share in S corporation.
Operating income of $100,000 would increase AAA by $100,000 and the operating incore would flow to each shareholder and increase their stock basis by $50,000.
Before the securities are distributed AAA would be $600,000 ($300,000+ $100,000+ $200,000). The amount of $1 million distributed would be treated as first from AAA to extent of $600,000 and further $400,000 from AEP.
AAA balance would reduce to 0 and AEP balance would reduce to $200,000 ($600,000 - $400,000).
Each shareholder basis before distribution would be $550,000 ($400,000+ $100,000+ $50,000). Shareholder basis would then reduce by non-taxable portion of distribution to $250,000 each. If the amount is distributed then each shareholder would have dividend income of $200,000.
To learn more about federal income tax effect link is here
brainly.com/question/15228314
#SPJ4
