At the beginning of the year, Penguin Corporation (a calendar year taxpayer) has a deficit in accumulated E&P of ($55,000). Penguin's current E&P is $36,000 earned evenly throughout the year. At the end of the year, Penguin distributes $40,000 in cash to Holly, its sole shareholder. Holly's basis in the stock of Penguin Corporation is $2,000. What is Holly's Dividend Income, if any? What is Holly's Return of Capital, if any? What is Holly's Capital gain, if any?

At the beginning of the year, Penguin Corporation (a calendar year taxpayer) has a deficit in accumulated E&P of ($55,000). Penguin's current E&P is $36,000 earned evenly throughout the year. At the end of the year, Penguin distributes $40,000 in cash to Holly, its sole shareholder. Holly's basis in the stock of Penguin Corporation is $2,000. What is Holly's Dividend Income, if any? What is Holly's Return of Capital, if any? What is Holly's Capital gain, if any?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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