a. $2,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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7.

 

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.
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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