T received a distribution with respect to his stock of $50,000.The corporation had neither accumulated nor current earnings and profits.T is entitled to recover his basis before he reports any gain or income because of the distribution.

Question

Quizplus · Accepted Answer

If a distribution is made with respect to the stock of a shareholder and the distribution exceeds the shareholder's basis in the stock, the excess is generally treated as a gain from the sale or exchange of the stock. However, if the corporation has neither accumulated nor current earnings and profits, the distribution is treated as a return of basis to the extent of the shareholder's basis in the stock. Therefore, the shareholder is entitled to recover their basis before reporting any gain or income.

T Received a Distribution with Respect to His Stock of $50,000.The