Oreo Corporation has AEP of $5,000 and negative CEP of $18,000. The corporation distributes $11,000 on March 1 to Morris, its sole shareholder, who has a $9,000 basis for his stock which he has held for 6 years. The treatment of the distribution will be Select one: a. $2,000 dividend and a $9,000 capital gain. b. $500 dividend, $9,000 tax free return of stock basis and $1,500 long-term capital gain. c. $2,000 dividend and a $9,000 tax free return of basis. d. $8,000 dividend and a $3,000 return of capital. e. None of the above.
Oreo Corporation has AEP of $5,000 and negative CEP of $18,000. The corporation distributes $11,000 on March 1 to Morris, its sole shareholder, who has a $9,000 basis for his stock which he has held for 6 years. The treatment of the distribution will be Select one: a. $2,000 dividend and a $9,000 capital gain. b. $500 dividend, $9,000 tax free return of stock basis and $1,500 long-term capital gain. c. $2,000 dividend and a $9,000 tax free return of basis. d. $8,000 dividend and a $3,000 return of capital. e. None of the above.
Chapter12: S Corporations
Section: Chapter Questions
Problem 19CE
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Oreo Corporation has AEP of $5,000 and negative CEP of $18,000. The corporation distributes $11,000 on March 1 to Morris, its sole shareholder, who has a $9,000 basis for his stock which he has held for 6 years. The treatment of the distribution will be
Select one:
a.
$2,000 dividend and a $9,000
b.
$500 dividend, $9,000 tax free return of stock basis and $1,500 long-term capital gain.
c.
$2,000 dividend and a $9,000 tax free return of basis.
d.
$8,000 dividend and a $3,000 return of capital.
e.
None of the above.
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