Vista Corporation, which has current earnings and profits (CE&P) of $10,000 and accumulated earnings and profits (AE&P) of $30,000, makes a $43,000 distribution to its sole shareholder, Julie, at the end of the current year.Julie has a basis in her Vista stock of $2,000.What is the amount of taxable income Julie must report from the Vista distribution?

Question

Quizplus · Accepted Answer

The distribution is first taxable to the extent of CE&P, which is $10,000. The remaining $33,000 is taxable to the extent of AE&P, which is $30,000. Thus, Julie must report $40,000 of taxable income from the Vista distribution.

Vista Corporation, Which Has Current Earnings and Profits (CE&P) of $10,000