Question 11 10 points Save Answer Alvin Askew is the scle sharehoder of AAble, I
ID: 2407322 • Letter: Q
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Question 11 10 points Save Answer Alvin Askew is the scle sharehoder of AAble, Inc. Alvin's basis in his AAble stock is $750,000. AAble has a deficit in Accumulated E&P; and, without regard for any of the following distributions, for the c has $10,000 current E&P; For each of the following distributions, select the statement that best describes the tax consequences year Alvin received a $35,000 cash distribution from AAble--no stock was redeemed. FMV $35,000) FMV $35,000) A. Alvin will report $25,000 of dividend income, with the remaining $10,000 being treated as a non-taxable reduction of his stock basis. In a property distribution, Alvin received property from AAble (AAble's adjusted basis $50,000, B. Alvin will report $10,000 of dividend income, with the remaining $25,000 being treated as a long-term capital gain. In a property distribution, Alvin received property from AAble (AAble's adjusted basis $20,000, C. Alvin will report $10,000 of dividend income, with the remaining $25,000 being treated as a non-taxable reduction of his stock basis. D. Alvin will report no dividend income, but rather, the entire $35,000 is treated as a non-taxable reduction of his stock basis. E. None of the possible answers is correct F. Alvin wil report no dividend income, but rather, the entire $35,000 is treated as a long-term capital gain. G.Alvin will report $25,000 of dividend income, with the remaining $10,000 being treated as a long-term capital gain.Explanation / Answer
1)Answer is c : Alwin will report $ 10000 of dividend income with the remaining $ 25000 being treated as a non taxable
reduction of his stock basis, This is because $ 10000 in current E & P is treated as a dividend.and
the remaining is amount $ 25000 is a reduction in stock basis.
2)answer is D. Alwin will report no dividend income but the entire $ 35000 is a non taxable reduction of his stock basis.This
is because of the the corporation will report a loss $50000(basis)- 35000(FMV) which will reduce the E & P to 0.
3)Answer is A. Alwin will report $ 25000 as dividend income with the remaining $ 10000 treated as non taxable reduction of
his stock basis.This is because the corporation will report a gain of $ 15000 . 35000(FMV)- 20000 (basis). This will increase
the balance in E&P to $ 25000.
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