Assume an S corp. has accumulated E & P of $1,000, AAA of $5,000 and makes a $7,000 distribution to the shareholder. Also assume the shareholder's basis in the S corp. stock is $500. How is this distribution taxed to the shareholder? Assume the ABC partnership distributes $5,000 cash, $1,000 in unrealized receivables (zero inside basis), $3,000 in inventory ($1,000 inside basis) and a piece of machinery (FMV of $3,000 and $500 inside basis) to a partner who has an outside basis of $10,000. How are these distributions taxed to the receiving partner?

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1 2 Cash 5000 Unrealized receivables 1000 In... View the full answer