a. $2,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
7.

Transcribed Image Text:Tandy Corp., a calendar year S corporation,
has $5,000 of accumulated earnings and
profits (AE&P) as of the beginning of 2022. At
the end of 2022, pre-distribution AAA (i.e., the
AAA balance before considering the
distribution) totals $8,000. During 2022, Polly,
the sole shareholder, receives a cash
distribution of $12,000 from Tandy. Polly's pre-
distribution basis in her stock (i.e., before
adjustment for the distribution) is $10,000.
Tandy Corp. elected S status in 1999. How
much of this distribution should Polly report in
her 2022 personal tax return as capital gain?
a. $2,000.
b. zero.
c. $4,000.
d. $5,000.
How much of this distribution should Polly
report in her 2022 personal tax return as
ordinary income? a. $2,000.
a. zero.
b. $4,000.
c. $5,000.
d. $2,000.
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