Puce Corporation,an accrual basis taxpayer,has struggled to survive since its formation,six years ago.As a result,it has a deficit in accumulated E & P at the beginning of the year of $340,000.This year,however,Puce earned a significant profit;taxable income was $240,000.Consequently,Puce made two cash distributions to Martha,its sole shareholder: $150,000 on July 1 and $200,000 December 31.The following information might be relevant to determining the tax treatment of the distributions.

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The Answer of Puce Corporation,an accrual basis taxpayer,has struggled to survive since its formation,six years ago.As a result,it has a deficit in accumulated E & P at the beginning of the year of $340,000.This year,however,Puce earned a significant profit;taxable income was $240,000.Consequently,Puce made two cash distributions to Martha,its sole shareholder: $150,000 on July 1 and $200,000 December 31.The following information might be relevant to determining the tax treatment of the distributions.

Puce Corporation,an Accrual Basis Taxpayer,has Struggled to Survive Since Its