On January 1,Tanager Corporation (a calendar year taxpayer)has accumulated E & P of $190,000.During the year,Tanager incurs a net loss of $240,000 from operations that accrues ratably.On June 30,Tanager distributes $100,000 to Sharisa,its sole shareholder,who has a basis in her stock of $40,000.How much of the $100,000 is a dividend to Sharisa?

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The deficit in current E & P equals $120,000 on June 30,the date of distribution.Subtracting this from accumulated E & P yields a net accumulated E & P balance on June 30 of $70,000 ($190,000 accumulated E & P at the beginning of the year - $120,000 current E & P deficit on June 30).Of the $100,000 distribution,$70,000 will be taxed as a dividend to Sharisa.

On January 1,Tanager Corporation (A Calendar Year Taxpayer)has Accumulated E