Sam owns 40% of the stock of Cheers Corp, an S Corporation. At the beginning of 2021, Cheers had AAA of $25,000 and E&P of $80,000 (from prior C corporation years). During 2021, Cheers earned $45,000 of ordinary business income and distributed a total of $100,000 cash to its shareholders (Sam received $40,000). Sam's basis in his Cheers stock was $30,000 as of 1/1/21. How much of Sam's $40,000 distribution from Cheers is taxable as a dividend?
Sam owns 40% of the stock of Cheers Corp, an S Corporation. At the beginning of 2021, Cheers had AAA of $25,000 and E&P of $80,000 (from prior C corporation years). During 2021, Cheers earned $45,000 of ordinary business income and distributed a total of $100,000 cash to its shareholders (Sam received $40,000). Sam's basis in his Cheers stock was $30,000 as of 1/1/21. How much of Sam's $40,000 distribution from Cheers is taxable as a dividend?
Chapter22: S Corporations
Section: Chapter Questions
Problem 27P
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![Sam owns 40% of the stock of Cheers Corp, an S Corporation.
At the beginning of 2021, Cheers had AAA of $25,000 and E&P of $80,000 (from prior C
corporation years).
During 2021, Cheers earned $45,000 of ordinary business income and distributed a total of
$100,000 cash to its shareholders ( Sam received $40,000).
Sam's basis in his Cheers stock was $30,000 as of 1/1/21.
How much of Sam's $40,000 distribution from Cheers is taxable as a dividend?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff962a12d-c9a6-4a2c-a897-5151b6fac2b3%2F01ed40f4-af4b-4f14-a90a-9644a58556bf%2Facxrm2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sam owns 40% of the stock of Cheers Corp, an S Corporation.
At the beginning of 2021, Cheers had AAA of $25,000 and E&P of $80,000 (from prior C
corporation years).
During 2021, Cheers earned $45,000 of ordinary business income and distributed a total of
$100,000 cash to its shareholders ( Sam received $40,000).
Sam's basis in his Cheers stock was $30,000 as of 1/1/21.
How much of Sam's $40,000 distribution from Cheers is taxable as a dividend?
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