Question7 10 points Save Answer Before considering the following distribution (d

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Question7 10 points Save Answer Before considering the following distribution (date of distribution, November 25), Ludite, Inc. has a deficit in AE&P; of ($25,000 and a deficit in CE&P; of ($20,000). Bob is the sole shareholder $15,000 stock basis. During the current year, Ludite distributed $50,000 to Bob as a non-liquidating distribution. Answer each of the following questions relating to this distribution. A. $35,000 B. $50,000 C. $20,000 D. $O E. $25,000 F None of the answers is correct G.SO H. $15,000 How much dividend income does Bob report? How much capital gain does Bob report? How much of the distribution is non-taxable to Bob? What is Bob's stock basis when the dust clears after this distribution?

Explanation / Answer

How much dividend income does Bob report? $0. As the accumulated E&P and current E&P both are deficit, the distribution will be treated as return on capital How much capital gain does Bob report? $35,000 Distribution to Bob 50000 Less: Stock basis 15000 Capital gain 35000 How much of the distribution is non-taxable to Bob? $15,000. Distribution to the extent stock basis is non taxable What is the Bob's stock basis when the dust clears after this distribution? $0.00

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