Arrow, a calendar-year S corporation, distributes $25,000 cash to its sole shareholder, Oliver, on December 31, 2021. O
Posted: Wed May 04, 2022 6:42 am
Arrow, a calendar-year S corporation, distributes $25,000 cash
to its sole shareholder, Oliver, on December 31, 2021. On
January 01, 2021, Oliver’s basis in his S corporation stock was
$23,500. Arrow’s AAA balance at the beginning of the year
(Jan. 01) was $17,500. Arrow’s records reflect the following
information for the year (2021):
Ordinary Income of
$20,000
Charitable Contributions of
$18,000
Dividends from a U.S. corporation of
$20,000
Long-Term Capital gain of
$19,000
Long-Term Capital loss of
$23,000
Short-term capital loss of
$13,000
In addition, Arrow has $1,000 remaining AEP (Accumulated
Earnings and Profits) from its conversion from a C corporation.
How is Oliver taxed on this distribution
and what is Oliver’s basis in Arrow after
the distribution? Be sure to calculate year-end AAA.
Explain your answer.
to its sole shareholder, Oliver, on December 31, 2021. On
January 01, 2021, Oliver’s basis in his S corporation stock was
$23,500. Arrow’s AAA balance at the beginning of the year
(Jan. 01) was $17,500. Arrow’s records reflect the following
information for the year (2021):
Ordinary Income of
$20,000
Charitable Contributions of
$18,000
Dividends from a U.S. corporation of
$20,000
Long-Term Capital gain of
$19,000
Long-Term Capital loss of
$23,000
Short-term capital loss of
$13,000
In addition, Arrow has $1,000 remaining AEP (Accumulated
Earnings and Profits) from its conversion from a C corporation.
How is Oliver taxed on this distribution
and what is Oliver’s basis in Arrow after
the distribution? Be sure to calculate year-end AAA.
Explain your answer.