Emma is the sole shareholder in Pacific Corporation and has owned the stock for five years.The basis in her stock is $50,000.Pacific distributes $35,000 to Emma.Accumulated earnings and profits at the beginning of the year equal $25,000 and current earnings and profits equal $5,000.
Required:
a.What are the tax consequences of this information?
b.What are the tax consequences of this information if,instead of distributing $35,000 to Emma,Pacific distributes $100,000 to Emma?

Question

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The Answer of Emma is the sole shareholder in Pacific Corporation and has owned the stock for five years.The basis in her stock is $50,000.Pacific distributes $35,000 to Emma.Accumulated earnings and profits at the beginning of the year equal $25,000 and current earnings and profits equal $5,000.
Required:
a.What are the tax consequences of this information?
b.What are the tax consequences of this information if,instead of distributing $35,000 to Emma,Pacific distributes $100,000 to Emma?

Emma Is the Sole Shareholder in Pacific Corporation and Has